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Where Taxpayers and Advisers Meet

Have your cake and eat it?

taxwize
Posts: 6
Joined: Fri Jun 03, 2011 10:18 am

Have your cake and eat it?

Postby taxwize » Thu Nov 15, 2018 5:07 pm

I'm an ex Collector of Taxes and then an ex HMIT Investigator but I left the Revenue a long time ago and a lot has changed !....we have a CT enquiry with omissions agreed. No dispute now about taxable profits.The company ceased trading 18 months ago with no assets.HMRC has been told by me if they want to get any money out of this they'll have to give relief against the overdrawn DLA "in real time". I have suggested the only way is a contract settlement.The Inspector is unhelpful and firstly said "we don't do those anymore" but is beginning to see the logistical impossibility of using any other method. The Director is in poor health but wants closure so he will fund a sum that is net of S458 relief.i.e it will recognise that he pays the company CT bill plus our fees for acting for his company before settlement day. He can't afford to pay the s455 charges upfront then try to claim them back some 9+ months later.The sticking point is that the Inspector wants a Certificate of Full Disclosure of all of the Director's personal assets in conjunction with his personal Statement of Assets and Liabilities. I find this totally unacceptable. When the Inspector asked me why I said "because he isn't the taxpayer". He is wearing his third party hat by paying on behalf of the company. I also commented that once the Contract Letter is signed it becomes a Debt Management issue, recoverable from the Director anyway. HMRC Inspectors want to have their cake and eat it. They don't want to discuss ability to pay but do want to know about his personal means to pay. Before I tell the Inspector what I think they should do with their Statement of Assets does anyone else have experience of this attitude with Statement of Assets etc for a third party?

robbob
Posts: 2726
Joined: Wed Aug 06, 2008 4:01 pm

Re: Have your cake and eat it?

Postby robbob » Thu Nov 15, 2018 6:11 pm

The sticking point is that the Inspector wants a Certificate of Full Disclosure of all of the Director's personal assets in conjunction with his personal Statement of Assets and Liabilities. I find this totally unacceptable. When the Inspector asked me why I said "because he isn't the taxpayer". He is wearing his third party hat by paying on behalf of the company.
Would i be correct in saying that your client the individual has a debt to the company that could be chased in full presumably if hmrc were owed matching assessments of tax and associated penalties and that you are wanting to quibble over the technicalities with regard to the timing of the s455 tax and other taxes that need to be paid.

If that is the case are you not the one playing hardball not offering a reasonable route to get this closed without things potentially turning more serious?

I fully understand the logic of the route you are taking as hmrc never seem to chase the obvious route here if the individual has a debt to the company and the company has a debt to hmrc.

Perhaps i am missing something when i feel that if it is his debt he should be willing to provide information to prove that he doesn't particularly have the means to pay this debt. As you say though rules is rules and he isn't the company and perhaps i am missing something subtle here.

wamstax
Posts: 1856
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Have your cake and eat it?

Postby wamstax » Thu Nov 15, 2018 7:02 pm

I may also be missing something but how have you got to an agreement on company profits without any consideration of the directors prrsonal means and asset position? Were there for example no understatement of company profits attributable to director extractions?

I would normally expect that where the settlement of a company’s settlement was dependent on a director repaying the resultant overdrawn directors account then not only would HMRC wish to be assured that this would happen by seeking a joint and several letter of offer but would wish to ensure the director had the asset base and ability to repay his debt within the projected timescale.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

wamstax
Posts: 1856
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Have your cake and eat it?

Postby wamstax » Thu Nov 15, 2018 7:05 pm

A contract settlement can only be achieved where both sides are satisfied the the parties to the contract have the ability and wherewithal to fully complete the contract.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

taxwize
Posts: 6
Joined: Fri Jun 03, 2011 10:18 am

Re: Have your cake and eat it?

Postby taxwize » Thu Nov 22, 2018 4:10 pm

We inherited the case from a practitioner out of his depth (to put it kindly) and both of the Inspectors handling this case over 4 years have repeatedly refused to consider other avenues of enquiry such as sampling of costs of meals ( fast food outlet) and personal means/capital statements, all suggested by me. However the response was "we don't do those any more.." HMRC confined itself to slavishly following average GPR. A la "Farthings". The business ceased trading in 2013 with no assets. The Director suffered a stroke prior to cessation. Am I playing hardball? I don't think so. Even if you said that I am, aren't we entitled to do that. How often these days do I see an Inspector not playing hardball? Never. Up to recently in this case, HMRC has been chasing profits it can't establish and scaling back. Now, following ADR, suddenly common sense prevails down at HMRC as if by magic. The only sticking point is possibly the Statement of Assets and Liabilities, an aspect that did not concern them previously. A Statement of Assets and Liabilities, back in the day, was not used to ascertain ability to pay.It was used to compare asset value at conclusion, to future asset value should a future enquiry be considered.But in this case, the taxpayer won't exist in the future. Let's not kid ourselves that your Tax Inspector cares about whether the other party can pay or not.Tax Inspectors aren't lawyers.

wamstax
Posts: 1856
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Have your cake and eat it?

Postby wamstax » Fri Nov 23, 2018 1:16 am

A SOA is a multiple purpose document. Yes it can be used to provide a starting point for any future compliance review but it is also used to provide a review document that can satisfy HMRC that they have got a reasonable result given known and certified assets and liabilities and heaven forbid if the client has either told porkies or is later discovered to have deliberately hidden material assets the certified document could be used to mount a potential investigation with a view to prosecution. So if it’s a reasonable and fair settlement what has your client got to hide?
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

wamstax
Posts: 1856
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Have your cake and eat it?

Postby wamstax » Fri Nov 23, 2018 1:35 am

If the company has little by way of assets to meet the settlement apart from the overdrawn DLA then inevitably the Inspector/Officer would have to satisfy themselves that the director had the ability to fund what after all would probably have to be a joint and several offer by the company AND the director on a joint and several basis. If you expect HMRC in such a situation to take a chance on the company settling or being liquidated you May be flying in fantasyland ( or feeling very 🍀 lucky)
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website


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