Reply to: Unsolicited 2011/12 letter + from HMRC

[webberg]

Are you suggesting if I wish to settle I just accept this analysis and pay up?

I'm suggesting nothing.

I'm just giving you information on how HMRC see the situation.

Bear in mind that I have a commercial interest in people not settling and instead seeking resolution via other means so my view is biased. That said , any competent adviser would help you (for a fee) settle, if that is what you want.

The equation is roughly:

Can I cope with the stress of an enquiry and perhaps still have to pay the tax eventually but balanced by the chance of a lower tax payment?

There are a lot of subjective points here.

How much stress can you deal with?
Can you pay the tax now?
Can you live with potentially paying a penalty even if you think you have done nothing untoward?
Is there a price you'd pay for certainty?
Even if you settle is that the end? What about the loans which may still exist?
Do you believe an adviser can get a lower value eventually?
Do you think you can cope with negotiating but not litigating?

All sorts of things an adviser cannot judge.

[webberg]

ok thanks - I have read a number of the threads and it is a bit hit and miss, i wonder if they are just starting with the most recent year and then once the whole process of appeals etc then they will also go for the other prior years.. The earlier years were all with the same scheme (same trust) and I know that all information within the trust was reported with the disclosure facilities to HMRC.

NO.

HMRC will work the cases based on expiring time limits for discovery.

The 2011/12 tax year moves out of the 4 year discovery window 5/4/16. There are a number of teams in HMRC working now on identifying and issuing DA's for that period.

Once they are through that, they may move on to 2012/13 immediately, or more likely get reassigned and come back to 12/13 just in time for Christmas?

[EBTContractor]

Are you suggesting if I wish to settle I just accept this analysis and pay up?

It's not analysis, it's synthetic thinking.

[Tomandjerry]

Why don't you ask them under which legislation or case they are asking you for the amount paid by the end client to the supplier. I don't think they can tell you. It is ludicrous.

[mav2010]

Because the analysis used by HMRC says you have had it.

Their analysis says that 100% of the money went to you and you then volunteered (by signing an agreement) to pay the scheme provider. That payment is not tax deductible and ergo; you are taxed on the full value.

The fact that you allowed the Scheme Provider to syphon off their fees and pay you the net, does not detract from the legal analysis HMRC allege. The above is just a convenient mechanism and does not alter who owned what cash legally.

Are you suggesting if I wish to settle I just accept this analysis and pay up?

[webberg]

Yeah that's what the "Other Income" figure looks like. They are trying to include the full amount that was paid by the client. Are they having a laugh? I've never received the amount that went to the Scheme Provider. How can I pay tax on money I've never seen?

Because the analysis used by HMRC says you have had it.

Their analysis says that 100% of the money went to you and you then volunteered (by signing an agreement) to pay the scheme provider. That payment is not tax deductible and ergo; you are taxed on the full value.

The fact that you allowed the Scheme Provider to syphon off their fees and pay you the net, does not detract from the legal analysis HMRC allege. The above is just a convenient mechanism and does not alter who owned what cash legally.

[mav2010]

If you were self-employed for that period, HMRC are definitely after more than the tax on the loan amount, they are currently asking people for the "full amount that was paid by the client".

Yeah that's what the "Other Income" figure looks like. They are trying to include the full amount that was paid by the client. Are they having a laugh? I've never received the amount that went to the Scheme Provider. How can I pay tax on money I've never seen?

[Tomandjerry]

If you were self-employed for that period, HMRC are definitely after more than the tax on the loan amount, they are currently asking people for the "full amount that was paid by the client".

[ZContractor]

Discovery letter and prior years

ok thanks - I have read a number of the threads and it is a bit hit and miss, i wonder if they are just starting with the most recent year and then once the whole process of appeals etc then they will also go for the other prior years.. The earlier years were all with the same scheme (same trust) and I know that all information within the trust was reported with the disclosure facilities to HMRC.

These threads are full of information on time limits.

Broadly though, if you submitted returns for the earlier years and have had no enquiry letter or assessment, chances are that HMRC have missed those periods and cannot now recoup them.

Read the threads though as this is not a simple process.

[webberg]

Thanks for the advice.

Should I send them my bank statements to prove this as well?
On the calculation page they have provided am I right in assuming the "Other Income" is purely for the loans?

The other two amounts they have used to come to a figure for "total income received" are "Profit from partnerships" and "pay from all employments" which was my wage basically.

Bank statements - I would say not.

Other income - probably, yes.

[mav2010]

If you have data showing a lower value, then a simple letter to them along the lines of, "I've checked my bank statements and they say that the loans were £xx,xxx. Please issue an amended assessment and in the meantime suspend collection".

If you don't want to speak with them, appoint somebody else to do it.

Thanks for the advice.

Should I send them my bank statements to prove this as well?
On the calculation page they have provided am I right in assuming the "Other Income" is purely for the loans?

The other two amounts they have used to come to a figure for "total income received" are "Profit from partnerships" and "pay from all employments" which was my wage basically.

[webberg]

Agreed! The extra 15k actually makes a lot of difference when taxed at 40% I would pay them 12k today if it meant getting them off my back. I can even provide bank statements to prove the loan amounts were 15k less than what they state. Scared to pick up the phone and speak to them though

If you have data showing a lower value, then a simple letter to them along the lines of, "I've checked my bank statements and they say that the loans were £xx,xxx. Please issue an amended assessment and in the meantime suspend collection".

If you don't want to speak with them, appoint somebody else to do it.

[webberg]

Hi I was with an offshore trust years 2009/10, 2010/11 & 2011/12 - I have just received a Discovery Letter for 2011/12 - the firm that I went through are preparing an Appeal Letter to be sent off within the 30days

I have a question - what is the likelihood that I would receive letters for the earlier years? - is this just the start with the 2011/12 and then they follow with the earlier years... I had read that there was some sort off cutoff period that the HMRC could go back and that is why they were issuing 2011/12 now before April-16

Thanks

These threads are full of information on time limits.

Broadly though, if you submitted returns for the earlier years and have had no enquiry letter or assessment, chances are that HMRC have missed those periods and cannot now recoup them.

Read the threads though as this is not a simple process.

[DotasScandal]

Scared to pick up the phone and speak to them though

Then don't. They'll probably say something, only to deny it later. Don't waste your time, pull these statements together, and do everything in writing. The written word stays, spoken words fly away.

[mav2010]

My experience with HMRC is that when they don't have the data, or are out of time, they guess and try it on. If they were less dishonest there is more chance that I might settle. I have now been through seven case officers, all of them giving the same flakey argument.

Agreed! The extra 15k actually makes a lot of difference when taxed at 40% I would pay them 12k today if it meant getting them off my back. I can even provide bank statements to prove the loan amounts were 15k less than what they state. Scared to pick up the phone and speak to them though