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Where Taxpayers and Advisers Meet

20 year rule.

carne-london
Posts: 37
Joined: Fri Oct 11, 2013 10:35 pm

Re: 20 year rule.

Postby carne-london » Thu Oct 23, 2014 2:34 pm

hi wamstax

Thanks for your advise. If i had known of your services then i woudl have definitely used you. I have one more question:

my biggest worry is will my penalty be 30%...50%....70%...or 100% plus the interest and the tax amount.

the investigation started in february 2013 and just wondering when will it end.....the uncertainity is affecting my health and i am losing sleep and i just want to know a figure form the taxman......£70,000.00.....100,000.00.......£150,000.00... then i can have a point to argue from.

my brother had a figure of 20,000.00 from the taxman and he ended up paying 5,000.00 and my cousin had a figure for 8,500 and he paid 5,000.00 after a settlement.

Will i get a similiar deal?

wamstax
Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: 20 year rule.

Postby wamstax » Thu Oct 23, 2014 3:36 pm

Hi Carne,
I am afraid that without knowing all the facts and considerations as regards your personal tax liabilities and your tax return filing etc position it is impossible to say exactly where your penalties will lie.

Basically unless you have effectively been guilty of fraud then there is no way that your penalty would be 100%. However your tax investigation specialists are the ones that will have to deal with matters as much as they are able and the penalties will be considered in relation to years up to and then from 2008-09 as follows:-
The penalties for
•inaccuracies in returns or other documents (FA07/SCH24/PARA1), and
•failing to notify HMRC of an under-assessment to tax (FA07/SCH24/PARA2)
apply where
•the inaccuracy is contained in (or the under-assessment relates to) a return or other document which is due to be filed on or after 1 April 2009, and
•the return or other document (or under-assessment) relates to a tax period beginning on or after 1 April 2008.
For income tax and corporation tax cases the return is based on accounts with a basis period ending in the period covered by the return. For 2008-09 the accounts basis period may start before 1 April 2008. For example, a 2008-09 income tax return could include accounts with a basis period 1 November 2007 to 31 October 2008. The tax period is the period covered by the return (6 April 2008 to 5 April 2009) not the period covered by the accounts. If there is an inaccuracy in the 2008-09 return, the penalty will be under FA 2007 Schedule 24.
For Pre Fa2007 years (2007-08 and earlier) the penalty starts at 100% and you then get discounts depending on your
(I) Disclosure - up to 20% for full disclosure on challenge
(ii) Cooperation - up to 40% for full cooperation
(iii) Size & Gravity - up to 40% depending on how serious your tax evasion has been

For Post FA2007 you calculate the penalty in a slightly different way and I will give an outline in the following posting
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: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: 20 year rule.

Postby wamstax » Thu Oct 23, 2014 4:09 pm

For FA2007 and following years you first of all consider the conduct of yourself in relation to the understated tax liabilities.

In the unlikely event that the understatements were as a result of innocent error or there was a reasonable excuse for the understatements (i.e. inaccuracy in spite of taking reasonable care ) then there would be no penalty and HMRC could assess back 4 years as long as they had discovered that there had been understatements.

If you were careless (i.e. failed to take reasonable care ) then HMRC could go back 6 years for inaccuracies in tax returns (or 20 years for failing to notify your chargeability) and the penalty would be judged in relation to whether you made your disclosure of the irregularity either in an unprompted manner (i.e. you had no fear of discovery ) or a prompted one

If your conduct was deliberate (i.e. knowing that your tax return was incorrect) then into the bargain would again come whether your disclosure was prompted or unprompted but also whether your tax evasion was as a result of concealed understatements.

Depending on all the above characteristics your penalties for each item (i.e. each understatement needs to be looked at individually) would fall into a particular range and you would then get a discount within that range for telling (i.e. acknowledging and advising HMRC of the errors); helping (doing what you can to help HMRC determine and agree the amount of tax underpaid) and providing access (i.e. making whatever you can available to HMRC to determine the amounts evaded).

So once you have determined the range you can get maximum abatements within that range as follows:-
Element of disclosure Percentage
Telling 30%
Helping 40%
Giving access 30%
Total Maximum abatement 100%
So if you get the full abatement your penalty will be the minimum penalty in the range through to getting no abatement (i.e. you resist everything and don't help or make records available ) your penalty will be at the maximum of the range .

The ranges are as follows:-
Unprompted disclosure
Type of inaccuracy Careless /under-assessment Deliberate Deliberate and concealed Attributable to another person
Maximum penalty 30% 70% 100% 100%
Minimum penalty 0% 20% 30% 30%

It is possible to reduce the penalty to nil for an unprompted disclosure of a careless inaccuracy

Prompted disclosure
For a prompted disclosure each penalty can be reduced by up to half of the maximum penalty as follows:-

Type of inaccuracy Careless /under-assessment Deliberate Deliberate and concealed Attributable to another person
Maximum penalty 30% 70% 100% 100%
Minimum penalty 15% 35% 50% 50%


So I hope that this gives you some idea of the complications that are involved however I have to stress that the first and most important thing for your adviser to achieve is minimising of the actual tax as everything runs from that and the penalty reductions and arguments basically depend on how good your tax specialist is at understanding the facts and mustering the proper arguments to achieve the desired result.

That is about as much assistance as can be given without fully examining all aspects of your own conduct and the facts surrounding the evasion/tax irregularities and being able to adopt/adapt them to the result. Can I also emphasise however that penalty considerations usually require you to have an open mind and realism as to your responsibility in relation to your tax obligations as it is not the first time that I have found people always try and blame somebody else for their errors and fail to appreciate the relevant things that can increase or reduce your final bill.

Best of luck and I suppose a little bit of tongue in cheek is not wasted in that if your specialist ever wants a second opinion ( probably at less than the hourly fee they are charging you ) that is part of how I make a living.
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: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: 20 year rule.

Postby wamstax » Thu Oct 23, 2014 4:18 pm

Sorry previous post didn't come out as it was on the screen and as regards the ranges for prompted and unprompted the various percentages should be placed under the different categories for example
Unprompted Careless has max 30% and min 0% with unprompted Attributable to Other person (mainly VAT Offences) max 100% and min 30%
Prompted Careless has max 30% and min 15% with prompted Attributable to Other person (mainly VAT Offences) max 100% and min 50%

Remember also that penalties for evasion involving offshore aspects can be double the Non-Offshore equivalents.

The key in all Tax Investigation is to ensure that you are totally realistic as to your own failures and understand what the advantages/disadvantages of cooperating and not cooperating may be and remember NEVER TELL LIES OR PRODUCE FALSE DOCUMENTS OR INFORMATION during a tax enquiry. This can lead to attitudes hardening and even worse may lead to consideration by HMRC (or in Scotland - the Procurator Fiscal) for prosecution.

Best of luck
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

maths
Posts: 7550
Joined: Wed Aug 06, 2008 3:25 pm

Re: 20 year rule.

Postby maths » Thu Oct 23, 2014 8:30 pm

TMA 1970 s36 provides for a 20 year limit where tax is lost due to deliberate action by taxpayer; or a failure to notify changeability etc.


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