Ho(w) to beat the taxman

If you cannot agree with the taxman you don’t have to just give in.  A London taxi driver wouldn’t give into the tax inspector’s demands, took his case to the independent Tax Tribunal, and won.

Mr Stephen Ho is a taxi driver mainly operating from Heathrow.  HMRC showed he had been allocated “cab tags” at Heathrow on 2 days when his records indicated he had not worked.  The Tax Inspector at Local Compliance also prepared a “cash flow” summary showing “negative cash” suggesting that Mr Ho must have had additional, unrecorded, cash takings. HMRC felt this proved that Mr Ho’s own records were incomplete and should be disregarded.  The tax officer then recalculated the profits making certain assumptions. and also assessed earlier years.

Mr Ho disagreed and decided to try his luck by making an appeal to the  independent First Tier Tax Tribunal.  The Tribunal criticised HMRC’s approach: “We conclude that there has been unreasonable conduct by HMRC”. They also found that the Tax Inspector’s “…cash flow test was flawed.  It rested on assumptions that were not justified by the evidence”.  The Tribunal concluded that Mr Ho’s tax returns should not be amended.

For many years Inland Revenue Inspectors have tried to “break” a taxpayer’s records and then substitute their own estimated numbers. This case is a reminder to HMRC that its case must based on a “sufficient evidential foundation”; which it was not.

What does it mean for me?

If you have a tax dispute or long running tax enquiry there are now two methods for bringing matters to a conclusion.  The Internal Review will bring a fresh pair of HMRC eyes to the situation and the Appeals process will bring an independent and objective judgment.  Success at either stage depends in the quality of the fact finding, presentation skills and technical knowledge of your tax adviser and their ability as an advocate.  Where worthwhile sums are at stake it is always worth engaging skilled and experienced specialist professionals to prepare your case.  Lynam Tax has prepared for many Tribunal hearings, and the process has usually meant HMRC conceding before the formal meeting.  We have also presented cases successfully at formal contentious hearings.  We are currently acting in a number of Tribunal hearing cases.

If you need advice and help in a contentious tax dispute call Paul Lynam now on 0845 643 9997 or email partners@lynamtax.co.uk