Postby l403fel » Mon Jan 09, 2006 6:22 am
We have been undergoing a tax investigation now for 19 months and it is drawing to a close. We created a database to store records on which we made ourselves using Microsoft Access. This database had the ability to create computer invoices and quotes (for the sale of computers) and component quotes (for the sale of individual components). We did not create a component quote system, which in hindsight was silly but none the less true. We moved to new premises 2 years ago and paid someone to create us a new database. We got them to compile our 4 previous databases into one for reference purposes; we copied across the invoices but not quotes as these were unnecessary. We are under investigation for years 2001 to 2002. When asked by the inspector to send them a copy of the database they found that the database contained sales of £125.000 more than we had banked. We had banked in that year £650.000. We went through the database and were able to account for £110.000. This £110.000 was made up of duplicate invoices, quotes being mixed in with invoices as like we said earlier there was no method of creating component quotes etc. This left us with about £15000 I had not completed finding reasons for. It was easy to account for large amounts of money by cross referencing the database with excel records I had kept, as the amounts got smaller in the £100.00 mark and £10 mark and even £2.5 mark it was harder to trace. With having found explanations for the difference I assumed they would have agreed with us that the database was flawed and never intended to be used as an accounts package. They have sent us a letter stating that they want to add £14000 to our year-end. We are obviously going to take this matter to a hearing, but am worried that if we cannot convince them that the database is flawed they could bankrupt us if they decide to take this matter back 6 years etc. Had this database been used to create a set of charted accounts it would have been laughed out of the office yet they are continuing to conclude it is an accounts package. Considering the amount they are asking for what reductions can we expect for complying all the way through the investigation and would they make us bankrupt if we did not have the money to pay them in one go. Can we ask for a new tax inspector to take over the case who would be more knowledgeable about databases as feel she does not understand how a database works or can be corrupted to see things in our favour. We have also proven that the database should contain about 30 blank records a month due to human error and the database she has only contains 30 blanks for the year, which makes us feel that when we compiled the 4 databases into one that the original blanks were filled with corrupted invoices from other years, and this would explain why there is an amount we cannot justify. Having looked into my personal bank accounts it is clear that I have taken loans from the bank when I needed money, paid my partner loans from my bank in the form of 2 checks, there is also a check written back to the company for a small amount of money when on occasions I have borrowed money from the till once. My bank account has also shown that I have been overdrawn and paid charges accordingly. My argument is that if I had £14000 extra a year I was taking from the shop then why would I pay these charges or take out loans or even make my partner a loan in the form of a cheque. Computer industry is getting keener and keener on price and we make an average of £20.000 profit a year and it is unthinkable that the company could make £14000 extra profit which could be siphoned out one-way or another. Any insights on this matter would be much appreciated and please take into account this is turning me grey so be gentle….