another expenses tax hassel post
Simon Harris
hi folks, long time no post. Those with long memories may recall me
posting about a tax hassel some time ago. Its still running but with
an interesting new twist which may have significance for a number of
us...Ive been advised that the oft quoted case establishing much
precedent doesnt apply. This is about site-based employees and what
is home-to-work travel etc ( The April 98 stuff )
the question is: whether to risk taking the case to the Tax
Commissioners or just to negotiate
I'm looking for opinions. I'll post the background seperately as its
longish
Simon Harris
As i said Ive been advised that the case establishing precedent doesnt
apply. Apparently in that case the bloke worked for once client for 5
years, charged all his daily travelling through the company and
admitted that he never did anything except raise invoices from his
home address. He didnt even have a computer at home !
the background to my case and I suspect other similar people with a
fight on their hands is very different. Mine is:...
I'm the normal one-man limited company set-up.
several years ago I did a contract installing / commissioning some
large unix boxes in an insurance company in Lancs.
I relocated the family at my own expense. The consultancy I
sub-contracted too wrote the location into the contract. when the
system went live they'd sold it to several other insurance co.s but
were losing money on it. So they asked me to spend a month or so at
their london offices sorting out the infrastructure ( config. mgmt. &
DBA stuff mainly ) . They were not prepared to do anything but a
rolling monthly agreement but they would re-pay all expenses incurred
at cost.
So I started the long haul weekly commute and slowly things got sorted
and the travel and accomodation costs built up. I paid them all out of
the company and re-payment was back into the company. This lasted
about 16 months ( and I was very glad when it ended ). I did work at
other of their customers, like a month in Milan, couple months in
Oldham, I did some work from the office in my home, but not asmuch as
I could have as it wasnt really an issue for them or me.
My accountant said the expenses were P11d "wholly & necessarily"
expenses ( since disputed by some, who say they are simply
cost-of-sales and not p11d) and we duly declared them as such in two
years worth of returns (once the tax man showed up the accountant got
rather coy. After changing his tune about what was a legitimate
expense the normally poor communication became awful [ some may recall
I asked months ago if anyone else had difficult experiences of them -
Nyman Linden & Co ? ] )
Anyway, many months after teh P11d. Here cometh the tax man claiming
the expenses are a personal benefit and that by miss-declaring them Im
due to pay the tax and penalties and fines and interest. Long trail of
exchanges follows.
I contacted several practices. A specilalist tax partnership, A
partner of Moores Rowland who have a large tax department and a
couple of local firms, eventually engaging one. The Moores partner
took it up with his tax dept and with the Chair of some scottish tax
body who lectures on tax law. Another firm took it up with a Prof.
McDougal ( or similar name ) who is a heavy weight tax chap, and with
a tax consultant who sits as a Commisionnor of Taxes in the south.
Opinion amongst the experts has ranged from "your morally right, but
you don't stand a hope in hell" through to "HMIT is flying a kite they
dont have any claim" and "HMIT have given up on the large corporates
who fight back and are now targetting the small man who hasnt the
expertise or finance to argue"
The chap who is a Commissioner and has examined my accounts & related
correspondance say that taking it to the local Comissioners stands a
good chance as he can show clearly that the "precedent" case is
different in quiet a few material facts.
My new accountants have talked to the Tax office a number of times.
The tax collector previously offered a deal, pay 15k tax and we will
forget the penalties. we wrote back and said the tax couldnt anount to
more than 9k under any interpretation. The revenue wrote back and said
if its 9k then heres another 5k in penalties etc.
My new accountant has also suggested the expenses could be offset
against the directors account which has been quiet healthy over the
period, and then there would be no tax due and hence no penalties to
pay. The last conversation with HMIT was apparently rather along the
lines of "you can't do that " and "make us an offer". The accountant
is adamant that prior years can be adjusted and so we can do it. He
thinks the "make an offer" shows the revenue to be worried that there
case is evapourating.
So the nub of the dilema.
0) payout about 14k
1) attempt to adjust the prior years accounts in which case I've
already paid the tax by virtue of the money being in the directors
account as un-drawn dividends. No fines but reserves exhausted. Also a
need to ensure that the dirs a/c wasnt over-drawn subsequently as a
result of adjustments - and thence new fines.
2) "make and off" IE negotiate a settlement, accepting that even if Im
morally right Im still financially screwed
3) risk the Commissioners with a possible outcome of nothing to pay if
they find in my favour upto somethiing like 30k if absolutely every
penalty and the absolute worst interpretation is placed on all
possibly due taxes. A probability somewhere in the middle I guess.
of course after the commissioners I can appeal to the high court -
entry price to that £5k for a brief and 25k anticipated after that
with still the tax to pay if i lose - too big a risk I think. If the
Commisioners find for me the revenue can appeal - I dont currently
know how I fight that or the costs involved.
If I win at 3) then there are a lot of other folks who provide
consultancy where they cross the 12mth boundry who would probably
like to know....
reasoned opinions anyone ? ( and well done for reading so far :-)
Stewart Pinkerton
sim...@lgclmdl.demon.co.uk (Simon Harris) writes:
>hi folks, long time no post. Those with long memories may recall me
>posting about a tax hassel some time ago. Its still running but with
>an interesting new twist which may have significance for a number of
>us...Ive been advised that the oft quoted case establishing much
>precedent doesnt apply. This is about site-based employees and what
>is home-to-work travel etc ( The April 98 stuff )
>
>the question is: whether to risk taking the case to the Tax
>Commissioners or just to negotiate
>
>I'm looking for opinions. I'll post the background seperately as its
>longish
Negotiate. Get tough, and they'll nickel and dime you to death with a
minutely detailed investigation of *all* your financial affairs. Can
you withstand a *full* investigation of every expenses claim and
source of income that you can't *prove* was legitimate by *their*
interpretation, for the past six years? They outnumber your resource
capability by thousands to one. Never *fight* the tax man.......
Think that's unfair? You have my deepest sympathy, which along with
one pound will buy you a lottery ticket.
--
Stewart Pinkerton | Music is art, audio is engineering
ASP Consulting |
(44) 1509 880112 |
Anon.
It was such a long time ago.......
Why can't you set up an off-shore account and avoid the hassle ?
What's the odds the tax-man would come after even a Jersey account ?
It's been a while since I was in the UK - but it used to be feasible and
possible.
Just an opinion.....
C.
<snip>
(refer to prev. post - too long)
Richard Bayliss
Anon. wrote in message <01bcfd2c$e278fee0$0982...@IQ84N2ay.bigger.net>...
>What's the odds the tax-man would come after even a Jersey account ?
Evens.
Jersey and Guernsey banks hand over boxes and boxes of information to the
Inland Revenue every month. Ever wondered why certain parts of the UK are
allowed such a benign tax regime??
end