Reply to: s660A - More Revenue "Guidance"

Quite so, Bradley

An individual shareholder doesn't necessarily have full information on other shareholders' details or their work or other contributions to the business, and the IR are really being naughty asking for it. The simple answer to that question should have been:-

"This is not a question which I, as a shareholder, am in a position to answer. However, I understand from the company secretary that some of the information you require is on record at Companies House, and the remaining information can be obtained from the company's PAYE records at the Inland Revenue".

The deliberate blurring of lines has got to stop - it's as insidious and sinister as re-writing history (with the new version of s660A) and calling us all 'customers' rather than taxpayers.

- SD

Re:Info

The info they want is in the public domain anyway, so she and her accountant thought “better give them what they ask”

What sort of accountant volunteers information to the Revenue? If its in the public domain why can't the Revenue by ar**d getting it?

Erm, no...

could find her under IR35, then Section 660 is out the window

They could still do both. Being inside IR35 is not a defence against you having received bounteous dividends in the first place (apart from it being entriely legal, that is, so just why should we have to defend agaisnt it...) It's just that the primary shareholder ends up with the S660 tax bill.

Re: Re:Investigation

They can, but they must write to the company and open an enquiry under the company tax reference. Until they do, your friend can tell them to get lost.

Her accountant has now replied with all the relevant information they wanted, not much point in having them snoop at the company's affairs……could find her under IR35, then Section 660 is out the window:lol :lol

The info they want is in the public domain anyway, so she and her accountant thought “better give them what they ask”

Re:Investigation

I assume the IR can open up an investigation in to your personal tax affairs, and then ask about the company? It seems a bit unfair.

They can, but they must write to the company and open an enquiry under the company tax reference. Until they do, your friend can tell them to get lost.

This is just another example of the Revenue blurring the lines between the individual and the company. The whole approach implies that the Inspector you're dealing with sees your friend as self-employed and is using the company as a tax-efficient "shell".

The reality is, of course, that the contractor is forced by circumstance to form a company and gets the attendant responsibilities as well as the tax advantages.

Most Inspectors don't realise this as they have spent a lifetime in a very large organisation filling out endless forms and have no sympathy, therefore, with those faced with the reality of what happens in the job market today.

Re:Investigation

I assume the IR can open up an investigation in to your personal tax affairs, and then ask about the company? It seems a bit unfair.
They can, but they must write to the company and open an enquiry under the company tax reference. Until they do, your friend can tell them to get lost.

This is just another example of the Revenue blurring the lines between the individual and the company. The whole approach implies that the Inspector you're dealing with sees your friend as self-employed and is using the company as a tax-efficient "shell".

The reality is, of course, that the contractor is forced by circumstance to form a company and gets the attendant responsibilities as well as the tax advantages.

Most Inspectors don't realise this as they have spent a lifetime in a very large organisation filling out endless forms and have no sympathy, therefore, with those faced with the reality of what happens in the job market today.

S660

Check the wording of the legislation. If ma and pa receive the divis and use them to their own benefit then its not an issue. Probably.

Section 660 –

Section 660 – looks like the IR are getting up to speed and opening investigations.

A colleague of mine has just received the dreaded letter, which said something like

1)&nbsp &nbsp &nbsp &nbsp Please give full analysis of dividends received on your 2002/03 tax return.

2)&nbsp &nbsp &nbsp &nbsp I note that XXXX Ltd (the company) had more than one shareholder, you held XX shares, please give full details of the other shareholders shareholdings, their duties and responsibilities within the company so that I can look the settlements legislation (section 660).

The other shareholders of the company are her Mother and Father, who are both retired and doing S F A for the company, so she is very worried with good reason, low salary and high dividends for the past couple of years.

I assume she can (for now) stick two fingers up at the IR, and not answers these questions until the artic systems case as gone through the appeal process?

I assume the IR can open up an investigation in to your personal tax affairs, and then ask about the company? It seems a bit unfair.

Re: Available Options

I'm going to back down slightly on this one. I knew saying nothing was regarded as an option by the accounting bodies producing advice, but as far as penalties go I've now read that there is some risk.

Available Options

A Guide to the Settlements Legislation for Small Business Advisers
www.inlandrevenue.gov.uk/...de_sba.pdf

Section 660A settlement provisions: Guidance note on disclosure www.tax.org.uk/showarticle.pl?id=2948&n=

Further Guidance from CIOT
www.tax.org.uk/attach.pl/...5final.doc


Three options available :

1) Do & tell IR nothing (IR can go back 6 years ig investigated).

2) Admit to being caught & Pay S660a taxes for the last 6 years

3) Inform IR that you disagree with their guidance & wait to see if start an enquiry within the 12 months.

Option 1 is keeping your head down & hope you are not investigated.

Option 2 is make you poorer immediately - compliance with IR view.

Option 3 offers protection against penalties, but leave you wide open to an investigation. IR have to start an enquiry within 12 months & cannot use discovery assessments after the 12 months. All IR need to do is send a standard enquiry commencement letter & drag it for years as they normally do.


Only hope is the PCG victory at the High Court in March. PCG is still looking for donations to their legal fund for defending the Artic case.

Re:Penalties

The purpose of the declaration is not to prevent penalties. The Inland Revenue are telling you how to achieve "full disclosure" on your tax return if you don't agree with their guidance, i.e. they are admitting that whether you owe them tax is open to debate.

Disagree - the Revenue will argue that the Return is incomplete & incorrect and that you were negligent in submitting an incomplete & incorrect Return. They may go after agents who have assisted in the preparation of the incomplete & incorrect return.

Re: The benefit of being sober....

Malvolio,

I dunno, I though it was quite a clear rant. Real problem is that so many of the rules are incompatible with self assessment. If two highly experienced commissioners are unable to agree what chance us mere mortals?

The benefit of being sober....

is that you can describe the situation clearly and effectively, covering al the bases. All I managed was a minor rant - but hey, it's Christmas...

However, we have come to the same conclusion, I believe

Re: All true, but...

So at the very least the Revenue will be looking for penalties from tax year 2002/03 onwards.

You can only be charged penalties if you have been fraudulent or negligent in your return. Given that the majority of our advisors in the accounting profession still do not believe the Inland Revenue are in the right, and the IR admit in their guidance that the law is disputed, a taxpayer is perfectly entitled to believe the IR are wrong and to fill in their return on that basis. (i.e. the taxpayer says nothing, because he does not believe the IR guidance on S660 accurately reflects the law, therefore he believes there is nothing to declare.)

The IR cannot charge penalties because they would have to prove that you were negligent. That is not going to stand up in court because everyone in the legal and accounting professions knows the position is not clear-cut. You are not being negligent if you have a perfectly reasonable view on the law which differs from that of the IR, as laid out in their guidance. I would think keeping a copy of an article quoting Anne Redstone that the Arctic case should have gone the other way (the misuse of the casting vote issue) would be an adequate defense in itself.

The purpose of the declaration is not to prevent penalties. The Inland Revenue are telling you how to achieve "full disclosure" on your tax return if you don't agree with their guidance, i.e. they are admitting that whether you owe them tax is open to debate. If you make it, the effect of declaration is to protect the year in question from a backdated (six-year rule) investigation because you have made full disclosure of your income. The downside is that it offers no protection against an investigation in the one year they have for an immediate (i.e. non-backdated) investigation, and (I would estimate) increases the probability of such an investigation from 0.1% to 99.9%. (And of course they will then try to "do you" not just for that year but for previous years as well, if there were dividends then.)

So I think the official advice from most accountants would be not to declare.

All true, but...

..is not knowing your real or potential tax liability acceptable?

..is not knowing if you are acting illegally acceptable?

..is not knowing if you are going to be charged several tens of thousands of pounds at some point in the next six years acceptable?

..is not having access to clear, unambiguous guidance acceptable? (the DTI site still advcates split dividends for small companies, for example)

..is having previously legal tax avoidance practices in place for ten years being made effectively illegal with no other change in circumstances?

..is basing your future on the basis of an imcomplete and highly dubious judgement acceptable?

FFS wake up and smell the coffee. This is a completely non-democraic situation we're in. Were there clear guidleines to follow, then no problem - I don't like paying tax but I'm not intentionally going to break any democratically set laws. That is not what we are facing though.

Bollocks to them. I'm not planning on saying anything.