I am sure them posting 2nd class or forgetting to post at all will become our problem. When state becomes unfair, u have no where to hide!
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Apologies as I think I missed the response.
This is a very grey area.
IF HMRC treat the loans as gross income AND they are admitting that you were self employed in doing so, then in theory they should allow a deduction for normal self employed expenses. In order to qualify costs must have been incurred wholly and exclusively for the business. In normal circumstances, where there is some doubt about whether a cost is "exclusive" to the business, some form of apportionment is agreed.
Where there are insufficient records to prove that costs were incurred, HMRC would be within their rights to dent relief. Again in most circumstances, they do not and instead come to a figure that they consider is reasonable. In the absence of evidence however do not expect that to be a high value.
The onus to prove expense is with the taxpayer. Submit a reasonable estimate and see what happens.
If HMRC treat the loan amounts as "net" income, in essence they are saying that it's salary subject to what used to be called Schedule E. Deductions from salary are only allowed if they are incurred wholly, exclusively and necessarily in the performance of the duties". The inclusion of "necessarily" is a very stiff test. Costs incurred that put you in a position to perform the duties (for example travel to a place of employment) would usually be excluded.
My guess is that HMRC has not thought this through yet so get some advice.Comment
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Thanks Rob. Based on the figures in my settlement offer, I believe they are treating the loans (in my case at least) as gross income.
My main expense claim would be mileage to and from the client's office. Is my best bet to write to them (without prejudice) with a breakdown and see what they say? This would (presumably) force them to show their hand in relation to their opinion on the employed/self-employed status?
Thanks again for replying!Comment
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Possibly it would force them to show their hand.Originally posted by meanttobeworking View Post
When I did my training, tax was divided into "schedules". The important ones were A, D and E. Schedule A was taxing property income. Schedule D was self employed income and schedule E was employed income. Those divisions are largely preserved in today's rules.
Schedule D also included other income and was arranged in "cases". Cases 1 and 2 was income from trades or professions. Case 3 was interest. Cases 4 and 5 unimportant for this purpose. Case 6 was "anything else".
If your income was in schedule D case 6 the expenses you could claim were a) very limited and b) available only against i9ncome from the same source.
If HMRC claim that the income here is based on the old schedule D case 6, they could refuse to allow any expense. In modern parlance they may say its income taxable under section 1017 et seq ITA 07 or possibly s 609 et seq.
Ask them for a basis for their assessment in technical terms.Comment
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Settlement Opportunity
Thanks. My liability is small compared to some, and although a reduction through expense claim would of course be welcome, I'm fortunate enough to be able to deal with it either way.Last edited by meanttobeworking; 29 October 2014, 22:19.Comment
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Settlement offer
Hi I called HMRC today regarding a revised assessment they provided me with . I asked the question If I pay back the full amount £20000 or so would I get a refund if successful . They instant answer was NO ... I think it makes sense to wait on the APN if this ever comes to cause. But the only worry is the interest mounting on a daily basis....Comment
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As has been said before (and will again no doubt), if you accept the settlement, that's the end of the matter. You will not get the result of any subsequent litigation success or defeat.Originally posted by Golddustz1 View Post
If you have a real worry about interest accruing, buy a Certificate of Tax DepositComment
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Buy Tax deposit certificates if worried about interest. Also show u r willing to pay if legally dueComment
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when is a settlement not a settlement?
http://www.financeandtaxtribunals.go...74/TC04098.pdf
Read in particular paras 20 to 24.
This is a short case (6 pages). Basically it was whether a taxpayer could reopen a contract settlement that they had already paid.
Whilst the short answer was "no" and the FTT decided they had no jurisdiction, it is interesting that HMRC offered what they call "overpayment relief".
This is where a "co-operative" taxpayer settles, but later an "unco-operative" taxpayer might get better terms. In that circumstance, HMRC can - IN SOME LIMITED CIRCUMSTANCES - reopen the settlement.
Don't get carried away that this allows you to settle, confident that a better litigation result may bring you some money back. Study the references made, take advice and use it as a tool in discussions with HMRC.
This is the HMRC Manual text
EM6413 - Contract Settlement: Post Settlement Issues - Reopening a Settlement: Adjusting Figures
The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.
Where a taxpayer has entered into a legal contract which is binding, we are not obliged to make any adjustments to the underlying figures.
It would however be incorrect to apply this in a way that places a cooperative taxpayer at a disadvantage over an un-cooperative one. For example, we may have to settle an enquiry into the return of an un-cooperated taxpayer using formal action at every stage. Because we have settled by assessment, they are entitled, within the relevant time limits, to all the relieving provisions in the Taxes Acts. This is in contrast to a cooperative taxpayer who has settled by contract.
We must therefore make sure that a taxpayer who has settled by contract is not disadvantaged and has the benefit of any adjustment that they could have claimed if the liability had been dealt with by assessment. In these circumstances you must consider re-opening the settlement.
The most common claims of this type are to loss relief (especially under ITA07/S72) and CTA10/S458 relief. You may also get claims to relief that were previously overlooked, or for FA09/Sch 52 overpayment relief adjustments.
You must only allow these claims when all the requisite conditions are satisfied (other than having settled by contract), and they comply with all of the relevant time limits.
Any assessments that were made but never finally determined should be regarded as determined on the date of acceptance of the offer. Time limits for assessing liabilities that could have been assessed formally but were included in the settlement should be applied as if assessments were issued on the date the offer was accepted.
You must not accept any attempts to re-open a settlement on
•general grounds, or
•the grounds that
◦a lower rate or gross profit could have been justified, or
◦the personal expenditure included in a capital statement was excessive.
However, the two grounds mentioned above about gross profit and personal expenditure can be acceptable if the incorrect figures were supplied by the taxpayer and could have formed the basis for a successful FA09/Sch 52 claim.
If you cannot accept the application to re-open a settlement, you must send a letter to the taxpayer explaining the reasons, unless the claim relates to a settlement by Specialist Investigations. In that case you must refer the claim to the relevant SI office.Comment
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