What points to raise at settlement time

[speake01]

Hi,

I am about to enter the settlement stage of my income tax investigation and would like some advice as to how I can go about reducing the final settlement figure as much as possible. Does anybody have any ideas as to what points I can raise and what the IR will take into consideration in order to reduce this final figure as much as possible.

Thanks.

[Sherlock]

First, you should receive from the inspector of taxes his or her suggestion of the tax penalty. This will be a percentage of the 100% of the total tax liability that could be charged as a penalty.

Supposing the penalty mitigation is 80%, you should ask the inspector how this is divided between the three factors of disclosure, co-operation and seriousness (size and gravity).
Mitigation of 20% (exceptionally 30%) can be given for disclosure, with 40% given for the other two factors (but one cannot have a 110% mitigation).

You may feel that there are additional factors that assist your case (i.e exceptional co-operation, no time delays and what you would term 'innocent errors' contributing to the loss of tax.

These factors should be stressed to the inspector at settlement stage. Do not expect HMRC to alter the penalty loading by more than 5%, though. basically, this part of the procedure is 'horse trading'.

Interest on unpaid tax and the tax itself is non-negotiable, but the inspector may be prepared to agree a round figure contract settlement. incorporating tax, interest and penalty.

[speake01]

Thank you for the reply. Just to clarify my penalty part is at 22% at the moment. When you say round figure settlement is there much leeway given here.