Discovery

[Cornwall]

Firstly thankyou Bill, DavidBen and Pallett for your comments.
The Inspectors reason for looking into the 'discovery' year, was that he felt that the claim against vehicle expenses was high, in relation to the following (enquiry) year.
I have since replied to his letter stating again that I do not feel that his quoted case is relevant and again requesting that the enquiry year is closed, as all requested information has been supplied or a reason given as to why it was not possible to do so.
I have also asked for an explanation re his comments on 'considerable penalties and interest' and 'the enquiry may show that an offence may have been committed'. Also that should he feel that he still has a right to discovery, that he has the papers referred as per Bill's comment.
While this may appear as if I am digging my heels in for what may be a small adjustment in tax on the 'discovery' year, I feel that once in, who is to say stop on any further discoveries either in that year or before?
Scot

[AvocadoK]

So he has not discovered anything at all! Remind him that he needs to have discovered additional profits in order to raise a discovery assessment.
Regards
DB

[wamstax]

OK so he "felt that"--- if that was his words then clearly he has nothing more than a feeling and that does not amount to a discovery that tax has been unpaid. Clearly the onus will be on him - without any further evidence to show that he has in fact discovered that tax has been underpaid and that the assessment if he is brave enough to make it is to the best of his judgement and ability. He is a crafty beggar as he relates the comparison to the year he has just enquired into and says that he feels that it is excessive. Turn that on its head and if it seemed excessive to the earlier years also then clearly there was no discovery after the window closed. In other words if it looked excessive in relation to earlier years then they had their opportunity during the enquiry window to open the enquiry and if they did not do it they are statute barred.
A wee bit tricky with HMRC using the later years comparison but maybe you could suggest that the enquiry year was only opened to get back into the earlier year if they have truly found lttle in the current year. Youcould of course ask them to dissuade you from that belief by providing their risk assessment for the case as it appeared for the enqiry year. I know this is grasping at hypothesis and you should never ask a question you don't know the answer to when you are heading for or before the Commissioners however it seems that the inspector is equally grasping at straws as he relates the excessiveness of the previous year claim to his findings in the enquiry year. If he found nothing wrong with the same expenses claim in the enquiry year why is he taking an opposite view of a PAST claim. Looks like a bit of prejudice there as I would have had more doubts in your stance - and less in his - if he had found the enquiry year vehicle expenses to be incorrect and it was on that basis he was seeking to open now closed years.
You do not give a figure for the subject of vehicle expenses in the "discovery year" but I assume that it is in excess of £50K to avoid being accused of dealing in trivia. I assume that the officer has been made aware of the HMRC enquiry policy that matters of enquiry should be meaningful in amounts and if a case is weak it should be dropped (or some similar sentiments)
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com

[Cornwall]

Bill
The total business turnover did not exceed £30K! and the vehicle expenses being questioned are just over £5K (the client replaced his vehicle the following year as it was decidely old). There was no errors found in the enquiry year expenses, just a misunderstanding by the client (who completed his own return) as to the method that an insurance claim and payment should have been dealt with and by not entering a debtors amount into his turnover!
Other than that there were a few deposits into his private account which all but one have been explained and backed up by the necessary paperwork.
So as far as I am concerned the man is only fishing and the delay is costing my client interest!
Scot

[wamstax]

You should ask for closure for the enquiry year and given the circumstances and continuin fees being incurred I would ask the Inspector to refer the matter to his manager as if it is found that the persistence in pursuing a trivial matter is as you consider unfounded then you will be entitled to compensation for the prersistent annoyance when you have asked him to act reasonably and give up the trivial pursuit of his flight of fancy. Does his managers know how he is acting? It needs to be highlighted n case he thnks that he can do this to others who may not be represented.
regards
bill@wamstaxltd.com

[wamstax]

Are you sure that it is an Inspector dealing with the case? Hardly justifies his £30K+ a year salary to be piddling about with potential adjustements of less than £5K profit. Looks like somebody needs to get a grip!!! or somebody else to rein him in and get him on to profitable yielding cases. He cannot be working cost effectively if he is looking to take a case before Special Commissioners for less than £1k tax. Of course now the twist in the tail - he might have information he CANNOT use relating to theearlier period and he needs to get into it to "uncover" it. Nothing stranger tha the ways of a Tax Inspector#
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com

[Cornwall]

Hi Bill & DB
The matter has now been passed on and the lady in question feels that as my client made an 'error' on the return (in year of enquiry) this constitutes 'negligence'!! and the Tax Office therefore have a right to look into any previous year. She has also 'taken a number of cases like this to the Commissioners and therefore knows she will win'. I requested a list of these cases where they have 'won' on the basis that an error constitutes 'negligence' and am still awaiting this info (not holding my breath though). However I have decided that I will take this to the Commissioners as neither I nor the English dictionery agree with her, and that under the Terms of 'Self' Assessment there is surely no expectancy that the 'layman' should (to quote her) 'know all the rules and regulations regarding the completing of a Tax Return' i.e. ''lack of knowledge of the law is not an excuse''!
Scot

[wamstax]

Hi Cornie,
You say the matter has been passed on.... does this mean to the Appeals Unit or to her( I note the Inspector seems to have had a sex operation in the time the correspondence has ensued) manager.

I think that you should be referring the matter to the appropriate area manager for their conssideration.

She might be quite correct that the error in the enquiry year constitutes negligence but unless she can point to negligence in the earlier year how can she sustain her determinations. After all she will have to take action under regulation 10 to obtain any informnation that she needs to sustain her determination and the whole basis should fall down when she seeks to make her determination /discovery assessment for the earlier year. Where exactly is the negligence in relation to the assessment she is seeking to justify.

Will be interested to hear developments and/or review the papers.
regards
bill@wamstaxltd.com
regards

[AvocadoK]

Hi Cornie
I agree with Bill's points re negligence - it is not a route that will get the Revenue anywhere. More likely, if the error in the year of enquiry is an error of principle that is likely to have been made in the previous year, they will make a discovery assessment based on that extrapolation. I suspect that the cases they cite will be along those lines - let us know what they are!

It also seems that you are being used as training ground for a junior officer learning the ropes! That officer may be looking for experience at the commissioners, hence the determiation to forge ahead even with small figures at stake. So don't treat it as an idle threat, and do read in full the cases she cites (she probably will rely on the Revenue case summaries).
Regards
DB

[wamstax]

Cornie would be more than happy to discuss negligence and the considerations and defences any time on a "fee" basis direct on a one to one basis and not on the forum.
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com