Tax Investigation - Worried Sick

by **Teary** on Thu Jul 22, 2010 8:49 pm

I was wondering if someone could help with a local tax issue I have, its giving sleepless nights already!!

After chasing my local offfice for a refund (for about 6 months last year) regarding PAYE deductions from my salary before expenses (as a postmaster which was being paid to me but into my Limited Company account soley used for this trade), my local tax inspector instigated a check on my company tax return for this ending NOV 09 (return requested a refund of about £13K after paying corp tax) and also at the same time my self assessment return for 08/09??!!

RE: Company Return - NOV 09

The inspector has decided not to give the refund and close the check for the company, argueing I correctly paid PAYE on my postmaster salary and my company would be required to show a loss of 70K to be offset against future income BUT I am no longer a postmaster and am in the process of closing the company. What can I do?

My accountant has initially argued that it was paid into the company and is company income and not personal hence PAYE was incorrectly deducted. Then after much back and fro the accountant decided to re-submit the company tax return as nil (explaing that the company was just a container) and the income was personal so that we could reclaim back the tax I paid on expenses that way (but within a higher tax bracket 40%). The inspector still disagreed.

We are not sure what to do now?

RE: Self Assessment Tax Return 08/09

Last week the inspector wrote to my Self Assessment Accountant and is now also claiming:

The business turnover (which was for another post office but not trading as a company, from 2001 to 2009 and completely separate from the above) should be returned as employment income and not self employment income.

Requested proof of expenses (largish travel expense) and whether we should have used NT Tax coding at all.

My worry for Self Assessment:

If the NT Tax coding is disallowed and hence certain expenses excluded e.g. travel can he then go back six years and re-claim back the tax plus interests and fine? What else will he look for?

Can HMRC hold claim to my assets such as my home? Its 50/50 owned with my parent, however my share includes to mortgage.

Also in 2005 I used some of the proceeds of the sale of a previous home to purchase my current home and made also home improvements and purchased a car. Am I liable to pay tax on any of this?

Alongside the above I have also been in full time employment since 2001

Can someone help, please. I am considering seeing a tax specialist can anyone recommend one?

by **wamstax** on Thu Jul 22, 2010 9:19 pm

It is not always clear from postings on a site that all relevant facts have been disclosed in the question.
You need to get somebody to look at all the paperwork on this this closely as the HMRC's own manuals at EIM68205 include the following:

Retail trade carried on by a company
Where a retail trade or business is carried on by a company from the same premises as a sub- post office, the Post Office salary is earnings of the sub-postmaster and not of the company. In practice, however, no objection should be raised to a request to treat the Post Office salary as income of the company provided that the sub-postmaster is required to, and does, hand over this remuneration to the company.

Why wasn't this taken up with the Inspector as clearly if you were required to hand over your post office salary to the company then the employment would have been in practice treated as the income of the company. Do you know if the Inspector had his own manuals referred to him.

You can have a look at either www.wamstaxltd.com or www.taxenquiryadvice.com to see if there are any pointers that might be of assistance to you. HOWEVER can I just say that I do not like your accountants "change of tack" in mid stream as this shows inconsistency in your treatment. This can be seen as a weakness by the Inspector and sometimes give him/her the idea that THEY have a strong case when in truth they have failed to address matters fully and never taken off their blinkers.