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Man jailed after failing to comply with Code of Practice 9 investigation

Bartley Murphy from Demesne Road, Downpatrick, has been sentenced to prison for 2 years and three months for tax fraud. Mr. Murphy developed and sold several houses between 2007 and 2014 but did not declare his profits to HMRC or paid any tax. He was offered Contractual Disclosure Facility under Code of Practice 9 by HMRC to make a full disclosure of his tax irregularities. However, despite being under a serious tax investigation Mr. Murphy chose to lie and did not make a full disclosure. Read more.

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Galiara [2018] TC 06431

The First Tier Tribunal has decided in favour of the appellant appeal against late filing penalties issued by HMRC. The Tribunal Judge found that HMRC had not been able to provide sufficient evidence that a notice to deliver a tax return had been sent to the tax payer. This case demonstrates that HMRC’s penalty system is not always right and that if appealed correctly, penalties issued wrongly can be cancelled.

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VAT Investigation Closed

This was a VAT investigation by HMRC into a retail company. At the outset, the figures proposed by HMRC were significantly higher compared to the information provided by our clients in terms of their sales and profits. Our team of tax investigation specialist met with HMRC and explained the business and demonstrated how the sales estimates were incorrect. We provided the required information and after a long delay, HMRC accepted that there was no VAT or corporation tax due and the case was eventually closed. We are grateful to HMRC officers involved for their cooperation and keeping an open mind in relation to our client’s struggling business.

Our analysis: We have come across a number of situations, where only due to poor communication by the accountants/ tax advisers and tax payers, a simple tax investigation is made far complicated than it needs to be. We have seen some accountants and their clients panic when meeting with HMRC officers and mis-communicating important facts that could be seen positively by HMRC. In our experience, effective communication of the facts and background to HMRC officers is critical in any tax investigation.

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Probate valuations and Capital Gains Tax

This case was referred to our firm by another firm of accountants in London. The client had inherited some properties a few years ago that they wanted sell. The issue was that the valuation used for probate purposes was quite low compared to market value at the time of death which meant that the capital gains tax on sale would be significantly higher. Our team of tax specialists took on the case an applied to HMRC’s valuation team to get a correct valuation. HMRC initially objected to our proposals but having provided sufficient supporting evidence comprising property valuations and sold prices, we were able to agree a figure with HMRC that was much closer to our initial proposal. The agreement by HMRC’s valuation office meant that our client’s capital gains tax liability was reduced to a fraction of the initial figure before we took on the case. The client was over the moon with the savings.

Our analysis: At the time the case was referred to us, our clients or their accountants had not even thought about getting a valuation agreed from HMRC’s specialist unit in order to reduce the liability. Due to our long running experience in our dealings with HMRC, this strategy was discussed with the client and they were quite happy with the idea. The tax savings achieved by our client were far higher than their expectations. It is always a good idea to seek advice from a tax specialist as this can bring substantial savings compared to costs.

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Post Death Inheritance Tax and Capital Gains Tax Planning

This client was referred to us by an accounting firm in London. The client had a bereavement in the family and the deceased was subject to significant inheritance tax due to the size of the estate. After long discussions and research into the deceased’s family and background, our specialist tax advisers were able to propose various post-death tax planning strategies to enable the tax liability to be completely eliminated. The tax planning structure was based on existing HMRC practices and the legislation which are often overlooked by advisers.

Our analysis: Inheritance tax is the only tax that can be significantly mitigated or even completely eliminated provided specialist tax planning advice has been taken and sufficient time has been allowed. We have come across a number of situations where clients come to us at a very old age and not much can be done other than some basic tax planning. We have also experienced families having to sell properties in order to pay the deceased’s inheritance tax. In some other cases, where we have been approached at a very late stage for inheritance tax advice, some of our clients have had to take very expensive insurance policies to cover the tax bill in case of death within in a certain time frame.

In the above situation, our client was quite lucky as there were some special exemptions that could be used to reduce the inheritance tax liability. These exemptions are not available to all individuals and our recommendation has always been to seek specialist advice at an early stage.

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R & C Commrs (ex parte a taxpayer) [2018] TC 06330

The First-tier Tribunal has allowed HMRCʼs application for a third-party information notice, allowing HMRC to obtain more details and records from a liquidated companyʼs former accountants and tax advisers with the aim to making the companyʼs director at the time personally liable for the Pay As You Earn and National Insurance Contributions owned by the company.

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R & C Commrs v English Holdings (BVI) Ltd [2018] BTC 501

The Upper Tribunal has ruled that the taxpayer should be allowed to offset losses arising from a trade carried on through a permanent establishment (PE) in the United Kingdom (as it would have been subject to corporation tax in the UK if it had been profitable) against profits chargeable to income tax from a lettings business not carried on by the permanent establishment.

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Cooke [2018] TC 06239

In the case of Cooke, the First-tier Tribunal allowed a taxpayerʼs appeal against a discovery assessment. The Tribunal judges found that although the taxpayerʼs self assessment return included an excessive claim to double tax relief, the error had not been brought about carelessly or deliberately by the taxpayerʼs agent, and an HMRC officer could have been genuinely and reasonably expected to have identified the error in the return based on the information available therein.

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