Forths Forensic Accountants have a significant degree of expertise in the field of tax investigations and have supported many clients when they have come under scrutiny from HMRC.
Our tax investigation specialists all obtained significant experience in the tax investigation field at national accountancy practices prior to becoming part of our team. They have a proven track record of achieving results for those they assist.
It is important to note that whilst a large proportion of our work in this arena is initially reactive (following unwanted correspondence from HMRC) a smaller proportion of our work is proactive where we assist tax payers in making voluntary disclosures to bring their tax affairs up to date (see 1. Voluntary Disclosures below).
Whatever the prevailing political environment may be in the UK, there is always an express objective, by HMRC, to ensure that individuals and companies who should pay tax in the UK are doing so, in accordance with the prescribed rules as set down in statute and case law.
Whilst a good proportion of tax investigations result from HMRC believing that tax evasion may have taken place, there are other tax investigations which arise simply as a result of mistakes or, indeed, differing interpretations of the prevailing taxation system structure which is very complicated.
A key feature of our case work is to challenge in principle the advances made by HMRC in claiming that more tax is due. It is important not to take anything at face value and to drill down to relevant tax legislation and case law. Commonly there might be other provisions that could help taxpayers which HMRC have not mentioned.
At Forths Forensic Accountants, we have encountered a myriad of different situations where tax investigations have been instigated by HMRC and have represented our client’s interests thereafter to minimise settlement figures in respect of tax, interest and penalties in a cost effective manner. Sometimes if HMRC have challenged with incorrect principles then there may be no more tax to pay.
We have listed some of the more generic types of tax investigations that we have been involved in below, in the event that any may be pertinent to you (please click on the subheading to see text). However, should you have an enquiry with regards to a specific type of tax investigation which is not listed below, then please contact us as this list should not be seen as a definitive list of the tax investigations that we can use our expertise to resolve.
1.Voluntary Disclosures
From an HMRC perspective, people who make voluntary disclosures are viewed in a better light than people who are “found out”. From your perspective, a voluntary disclosure puts you on the front foot. Your tax investigation specialist is able to make a full presentation of your case and all relevant financial documentation rather than the one sided abstract picture that may be presented if a case is simply pieced together by HMRC against you.
From a financial perspective, it is often the case that, by taking this proactive step, the penalties are a lot lower than would be the case if you are caught by HMRC.
Further, it is our experience, and indeed it is the case that, for a number of individuals, the strain of knowingly under-declaring their income over a period gets to the point that any financial benefit achieved is eroded by the worry of a knock on the door from HMRC.
If you are considering making a voluntary disclosure, please contact us today and discuss how to take this forward.
Typical areas where a voluntary disclosure may be required (i.e. you are not alone) are:-
- Rental from a second house
- A capital gain on the sale of a property or shares
See also 6, Lichtenstien Disclosure Facility (“LDF”) work, relevant to disclosure of income from overseas bank accounts / investments
2.Construction Industry Scheme (CIS) Investigations
The Construction Industry Scheme sets out the rules for how payments to subcontractors for work associated with construction must be handled by contractors.
Essentially, the CIS was set up to ensure that subcontractors paid a proportion of their earnings as an ‘on account’ tax payments, their true position being established through the submission of a Tax Return by the relevant submission date, as determined by normal tax rules.
The amendments to the CIS regime in 2007 introduced even more complexity making the rules easier to fall foul of.
Forths Forensic Accountants can help contractors in the case of HMRC allegations of a breach of the rules. Examples of such breaches would be:-
- Deducting tax at a lower rate than is required
- Not deducting tax on a category of payments where tax should have been deducted
- Tax return filing and payment irregularities
Every case is different, but we have successful experience of robustly defending contractors against such CIS Investigations from HMRC and resisting demands for more tax and penalties.
A relatively large proportion of tax investigations are commenced in this very specific area. This is because of the complexity of the CIS rules and HMRC’s perceived risk of the construction industry.
We are also able to provide a preventative service in relation to the running of the CIS scheme in your business to ensure that future problems do not arise.
Our service involves an independent check of client systems and procedures to identify any flaws before HMRC do.
Please call us for a discussion.
3.Capital Taxes (CGT / IHT) Investigations
The phrase Capital Taxes encompasses Capital Gains Tax (“CGT”), Inheritance Tax (“IHT”) and Stamp Duty
It is often the case that, unlike other types of tax investigations, individuals who receive tax investigations in these areas do not have any normal advisers to hand and literally do not know where to turn when they are investigated.
Our friendly, yet results driven, approach is ideal for such individuals who may not have encountered a tax adviser before, never mind a specialist tax investigation expert.
We have considerable experience of tax investigations in such areas which often occur as a result of individuals “coming into money” and not having an understanding on the rules around how tax events can arise and how declarations should be calculated and made.
4.Employment Related Investigations – Employment Termination Payments
There can be any number of reasons for individuals to be released from employment which are exacerbated in poor economic times.
If you have received compensation for termination of your employment, then some of your “pay off” may be tax free.
This is a complicated area though and we strongly advise that if you are experiencing the prospect of being forced to leave your job that you take tax advice before signing what might be called a “compromise agreement”.
It is the responsibility of the employer to deduct tax from termination payments at the right rate. Whereas typically a compromise agreement (drawn up by the employer), if signed, will place the responsibility for any further tax and national insurance due onto the employee.
If you receive a tax investigation into a termination payment then call us, it may not be too late to help
5.VAT Investigations
Prior to the formation of HMRC, the Inland Revenue and Her Majesty’s Customs & Excise (HMCE) were separate tax collection agencies. HMCE’s remit was solely to collect VAT and the Inland Revenue all other taxes. It is hardly surprising therefore that the complexity of the rates surroundings the VAT system are significant.
VAT investigations can be varied in their nature, e.g Investigations into “Carousel” fraud or Missing Trader Intra Community (MTIC), as it may be otherwise known, technical enquiries in relation to VAT on property or the TOMS scheme.
Forths Forensic Accountants are on hand to robustly defend your position whatever the area. We have access to experts in all areas of VAT, even the most unusual circumstances.
6.Voluntary disclosure of offshore income and the Lichtenstein Disclosure Facility (“LDF”) work
International Governments continue to strive towards banking transparency. The UK Government is no different and pressure is mounting on UK residents to disclose income to HMRC, on monies that they hold offshore.
If individuals, who have not disclosed income in the past, now wish to declare their income voluntarily there is a current facility that allows them to do so on relatively beneficial terms. This is known as the Liechtenstein Disclosure Facility.
It is important to note that individuals without money currently in Liechtenstein can use the facility.
Briefly, the main potential benefits of the LDF are as follows:-
- A guaranteed immunity from criminal prosecution
- Tax geared penalties limited to 10% (otherwise could be up to 200%)
- Disclosure required only back to 1999 (otherwise disclosure required for past 20 years)
To secure the benefits individuals who have investments in Liechtenstein or through Liechtenstein entities must make a full disclosure. People with monies in other offshore jurisdictions can move money to Liechtenstein now to benefit.
Forths Forensic Accountants are helping to guide a number of individuals through the process and HMRC have agreed disclosures made by us on behalf of clients without any further enquiries into their financial affairs.
7.UK Swiss Tax Treaty
On 6 October 2011, a new Tax Agreement between the UK and Switzerland was signed by the UK Exchequer Secretary and the Swiss Finance Minister.
The agreement, whilst not yet in force, is likely to take effect from 1 January 2013.
The nature of this agreement (see news item for more detail) effectively blows open the secrecy of the past and will make Swiss Accounts of UK Tax Payers known to HMRC or subject to a substantial past and future tax deduction.
If you are an individual with a Swiss Bank Account and require advice regarding the same and / or the potential benefits of making a voluntary disclosure now, please contact our team.
Forths Forensic Accountants are fully au fait with the provisions of the new Treaty and are in a position to comprehensively advise you regarding the same.
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8.Review of Share Valuations
Disposals of shares in private limited companies between connected parties can often attract a tax charge. Such a tax charge is based on a value of the shares, but what is the true value (given that the transaction is not a commercial one)?
Valuation of shares in private limited companies is not an exact science and will often require negotiation with HM Revenue & Customs.
Our team have a great deal of experience in valuing shares in private limited companies and negotiating values with HMRC’s valuation office.
Please call us to talk about where your negotiations or valuation process has got to.
We offer a free initial consultation and guarantee that your case will be dealt with in an expedient and totally private manner.
We list below some frequently asked questions which should provide some further background to the work we can undertake for you.
Why use Forths Forensic Accountants, what’s wrong with my accountants?
If you are happy with their service, there is nothing wrong with your normal accountants for dealing with nearly all routine accountancy and compliance tax work, especially general compliance checks on businesses.
It is generally recognised, however, that in certain situations many general accountancy practitioners do not possess the specialist skills required to steer their clients robustly through the situation of a more technically complicated tax investigation.
Tax investigations are an area where it is imperative that a specialist skill set is applied to get the best possible result.
We have honed our tax investigation skills over many years of being involved in disputes with HMRC and would respectfully suggest that if you are involved in a tax investigation, it is not the time for having someone “cut their teeth” on your case.
Is there any limit to the size of tax investigation you can assist me in?
Not at all, we are here to assist you in all cases from relatively routine enquiries (tax investigations) to more serious ones. Indeed, it may not be possible at the very start of a particular tax investigation to ascertain immediately the exact size of the case.
We have developed a fee structure that enables us to assist most individuals in a cost effective manner and we will be able to give you a broad idea, from your first free telephone consultation, of the degree of work required.
What do I do if I am the subject of a Tax Investigation?
Hopefully you are asking this question having just received your initial notification from HMRC that your financial affairs are the subject of a tax investigation (for whatever reason).
If this is the case then our advice is quite simply, engage our firm (or indeed any other suitably qualified agent) as your tax investigation specialist before doing anything else.
The devil, as they say, is in the detail and it is important that you are well represented from the start of the tax investigation until the end of the tax investigation by professionals who are on your side and who are experienced in presenting cases to HMRC.
It is important, at this juncture, that you do not panic and contact HMRC yourself and attempt to sort the situation out and particularly important that you do not attend any meetings (be they informal or not) on your own.
Information provided in an unstructured manner in an informal meeting can very often become a rod for your own back
We accept that, in certain situations, you are obliged to attend a meeting (with appropriate representation) in the event of a Code of Practice 9 tax enquiry or Section 144 tax enquiry, but even then you should be briefed prior to the same.
Once you have instructed ourselves we will undertake all correspondence with HMRC and act as your representatives until the conclusion of the tax investigation. Whilst there will be an obvious requirement for us to have meetings with yourself for you to provide ourselves with financial information relevant to your situation, we will be the buffer between HMRC and yourself and ensure that when information is provided, it is done so in a correct manner.
If you are reading this having initially attempted to deal with the tax investigation yourself, then please do not assume that all is lost as this may not be the case.
We would still recommend that you contact ourselves, as a matter of urgency, in order that we can discuss your situation and ascertain what needs to be done next to get the investigation back on track towards a best possible outcome.
Why are they picking on me?
Rest assured that you are not the only one under scrutiny, at any juncture, there are thousands of such tax investigations ongoing.
Unless you know for certain that your actions with regards to tax declarations have been incorrect, do not immediately assume the worse. An investigation can arise simply through a lack of understanding and interpretation of the financial facts of your particular situation by HMRC.
It has to be recognised that there can be a whole host of reasons why a tax investigation is opened by HMRC. Although the crux of the matter is that, for whatever those reasons, HMRC consider that you have underpaid tax and are seeking redress to this situation.
The result of the tax investigation will be that you prove that you do not owe anymore tax (and their assertions are incorrect) or you will have an additional tax liability but possible less than they have assessed.
Whatever the answer should be to the above, you are going to be much better placed to achieve the result you should do by appointing a suitably qualified tax investigation specialist to present your case.
How long will this last?
The length of tax investigations vary dependent upon the complexities of the tax principles involved in the enquiry and how easily relevant data can be gathered
It is important to recognise that a tax investigation cannot be rushed, rather should be approached in a robust and diligent fashion with information provided to HMRC once it has been fully considered.
It is a fact though that the speed with which you comply with our requests for full disclosure of information, can impact on this time period and any penalties that HMRC which to impose. Therefore, should you engage our services, it is vital that you assist us throughout the process in a responsive fashion in order to assist yourself.
How much will I have to pay to HMRC?
If at the end of the tax investigation it is proven that an element of additional tax is payable then interest will also be payable on top of the tax. Then, depending on the underlying reason for the underpayment, HMRC may seek to impose penalties.
The range of penalties is currently 0% to 200%. Our team have a proven track record in negotiating penalties in terms of the overall settlement
How much trouble am I in?
In reality, the answer to this question can only be provided with confidence when the tax investigation is underway and we are able to ascertain the exact nature of all of the issues we are faced with. However, there are certain indications, at the start of an investigation, which suggest a greater degree of ‘trouble’. We highlight these below:
Civil Investigation of Fraud (CIF) / Code of Practice 9 (COP9)
These tax investigations are undertaken where HMRC suspect that tax evasion or tax fraud has occurred resulting in an under / non payment of tax of more than £75,000. They start off life as a civil tax investigation (with the remedy of payment and penalties) but can become a criminal tax investigation if the tax payer continues to deceive HMRC (such cases are passed to the Revenue & Customs Prosecutions Office (RCPO)). Such a tax investigation will involve an obligatory meeting with HMRC (with your advisor) and ultimately the provision of a formal disclosure report at the end of the tax investigation concluding on the amount payable (if relevant).
Special Civil Investigations (SCI)
These tax investigations are similar to the above but involve suspected amounts of more than £500,000. Obviously, given the amounts involved, these tax investigations are undertaken by HMRC’s best inspectors who create a very pressurised environment in order to satisfy their objectives of maximum additional tax payments.
Criminal Tax Investigations
In the event that your situation has progressed to a criminal tax investigation, we can still assist. Through our work on Criminal Defence Assignments (in our Commercial, Corporate and Criminal Defence Forensic Accountancy department) we have affiliations with some of the best white collar criminal solicitors, barristers and QC’s in the Country which we have worked with on many high profile cases to secure collaborative solutions to this type of problems. If you receive a notice under TMA S106A, it is not too late, but you must call us immediately