A little bit of this; a little bit of that | Tax Adviser
The above is a link to an article about a tax case. It involved a company which provides accounting, tax and corporate services to 700/800 contractors and consultants. In August 2012, HMRC suggested that PML was an MSC provider (ITEPA 2003, Pt 2 Ch 9). Following a brief discussion, HMRC issued a formal request for a huge amount of information under the powers in FA 2008 Sch 36. Following various exchanges and some unfortunate personal circumstances, the majority of the data was supplied, late, but a penalty (£300) was raised. The case was about whether the penalty was valid.
Long story, short. The penalty was held to be invalid as HMRC had used the wrong subsection to raise the original information notice.
Why then mention this?
The barrister who wrote the article makes some acute observations.
1. It's generally unhelpful when HMRC threaten or raise penalties at the earliest opportunity as this decreases the appetite to cooperate and makes taxpayers more defensive.
2. HMRC seems to have a tendency to use threatened or actual penalties if he/she does not get the answer expected or feels that clarification is needed.
3. Sch 36 gives relatively junior officers the powers to issue penalties and this risks their abuse.
4. Only if the taxpayer is willing to risk the cost of resistance can the potential excess use of these powers be exposed.
He observes that cynics might say that this is exactly HMRC's policy, designed to maximise revenue rather than asking for the "right" amount of tax.
He also observes that HMRC increasingly often ask for information on the grounds that they may otherwise not get it, and it's not HMRC's fault if taxpayers are not "savvy enough to know when a challenge might be appropriate".
He finished with an observation that although HMRC is charged with "collection and management of revenue", this is defined in CRCA s51(3) as meaning "care and management". He fears that HMRC is too focussed on collection and needs to start caring.
Overall I think a good article. The barrister is Keith Gordon of Temple Tax Chambers.
I would agree with most of his comments.
We have seen (and challenged) HMRC requests for information on "schemes" which go far beyond what contractors can be expected to know and inappropriately stray into areas asking for opinion and supposition.
I'm on record in this forum as saying that HMRC requests should NEVER be ignored and I stand by that. However there is a difference between giving HMRC what they are legally and reasonably entitled to and supplying the rope to hang yourself.
If you are in receipt of information request(s) and are unsure - get advice.
The above is a link to an article about a tax case. It involved a company which provides accounting, tax and corporate services to 700/800 contractors and consultants. In August 2012, HMRC suggested that PML was an MSC provider (ITEPA 2003, Pt 2 Ch 9). Following a brief discussion, HMRC issued a formal request for a huge amount of information under the powers in FA 2008 Sch 36. Following various exchanges and some unfortunate personal circumstances, the majority of the data was supplied, late, but a penalty (£300) was raised. The case was about whether the penalty was valid.
Long story, short. The penalty was held to be invalid as HMRC had used the wrong subsection to raise the original information notice.
Why then mention this?
The barrister who wrote the article makes some acute observations.
1. It's generally unhelpful when HMRC threaten or raise penalties at the earliest opportunity as this decreases the appetite to cooperate and makes taxpayers more defensive.
2. HMRC seems to have a tendency to use threatened or actual penalties if he/she does not get the answer expected or feels that clarification is needed.
3. Sch 36 gives relatively junior officers the powers to issue penalties and this risks their abuse.
4. Only if the taxpayer is willing to risk the cost of resistance can the potential excess use of these powers be exposed.
He observes that cynics might say that this is exactly HMRC's policy, designed to maximise revenue rather than asking for the "right" amount of tax.
He also observes that HMRC increasingly often ask for information on the grounds that they may otherwise not get it, and it's not HMRC's fault if taxpayers are not "savvy enough to know when a challenge might be appropriate".
He finished with an observation that although HMRC is charged with "collection and management of revenue", this is defined in CRCA s51(3) as meaning "care and management". He fears that HMRC is too focussed on collection and needs to start caring.
Overall I think a good article. The barrister is Keith Gordon of Temple Tax Chambers.
I would agree with most of his comments.
We have seen (and challenged) HMRC requests for information on "schemes" which go far beyond what contractors can be expected to know and inappropriately stray into areas asking for opinion and supposition.
I'm on record in this forum as saying that HMRC requests should NEVER be ignored and I stand by that. However there is a difference between giving HMRC what they are legally and reasonably entitled to and supplying the rope to hang yourself.
If you are in receipt of information request(s) and are unsure - get advice.
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