Tax enquiry victories
The following are a few of the taxation cases which were handled successfully by our Principal James Wright-Anderson – BA (Hons), MBA(Durham), PGCE, ACMA, FAIA, FCCA, CA (J).
TAX CASE #1 INCOME TAX:
Inspector of Taxes accepts defeat at re-opened General Commissioner’s Appeal with savings of £18627.11
Summary of Case: June 1991
1.1 Appointed to act as accountants on 17 June 1991 by a sole trader operating an “Off Licence” trade in Brixton, South London
1.2 Accounts for the two years ended 28 February 1988 were prepared and submitted to H M Inspector of Taxes on 5 July 1991 together with a letter requesting the re-opening of the General Commissioners meeting, as the years 1988/89 & 1989/90 were already confirmed by the Commissioners.
1.3 On 5 July 1991 H M Inspector of Taxes (Lambeth District) were notified that the accounts for the three years ended 28 February 1991 would follow within four weeks and that relief was being sought under Section 33 Taxes Management Act 1970 for 1987/88 together with a new hearing for 1988/89 & 1989/90
1.4 On 17 October 1991, H M Inspector of Taxes agreed the S33 relief claim for 1987/88 but asserted that 1988/89 & 1989/90 were confirmed by the “General Commissioners” and consequently only the Commissioners could re-open a case if there were valid grounds; and in their opinion, there was none! The accounts and tax computations were further agreed for 1990/91 and 1991/92
1.5 Representations were made to the “Clerk to the General Commissioners” (Second East Brixton Division) emphasising that the actions taken at the previous Commissioners meeting were “devoid of natural justice” and that “equity” would dictate a re-trial.
1.6 On 9 December 1991 a notice from the “Clerk to the General Commissioners” confirmed a new hearing on 14 January 1992 at the Law Society’s Hall, 113 Chancery Lane, London WC2. but also noted the “Inspector” wishes to oppose the application
1.7 James Wright-Anderson argued the case for the client on 14 January 1992, despite the opposing counter arguments from HM Inspector of Taxes; the case was adjourned within 90 minutes of hearing evidence, for the next hearing date.
1.8 A letter dated 20 January 1992 from the “General Commissioners of Income Tax Second East Brixton Division” confirmed that upon hearing evidence on 14 January 1992 the Commissioners agreed to grant the application for the years of assessment 1988/89 & 1989/90 as requested. The adjournment on 14 January 1992 was to give the Inspector time to agree the accounts.
1.9 All assessments for the five years 1987/88 to 1991/92 were therefore accepted by the Inspector of Taxes, and the original assessments of £28,821.99 was agreed at £10,194.88, thus saving the client a sum of £18,627.11. The good news was confirmed to the client in a letter dated 28 January 1992.
TAX CASE #2 INCOME TAX:
HMRC u-turn results in apology for raising £50,000 tax assessments!
Summary of Case: December 1992
2.1 Assessments raised by HMRC (Edinburgh 7 District) on taxpayer operating a restaurant business in Edinburgh for 1987/88 to 1993/94 resulting in liabilities exceeding £50,000.00.
2.2 After one year of protracted correspondence and negotiations failed to reach a satisfactory conclusion, the matter was listed for hearing by the “General Commissioners of Taxes” in Edinburgh on Tuesday 18 January 1994.
The defence prepared for the client was summarised on 16 A4 pages and had 124 appendices in support of the case.
The District Inspector requested an adjournment as the defence prepared by James Wright & Co would need a full day to be heard.
2.3 The case moved on from the initiating Inspector of Taxes to the Investigation Manager and ultimately to the District Inspector who spent a month reviewing the case after James Wright & Co had requested that the case be heard by the “Special Commissioners”
2.4 In May 1995, the District Inspector, conceded defeat and offered a full apology (without a trial) and withdrew all of the assessments.
2.5 The apology from HMRC was accepted and no request was made for costs, although the client could have secured this, for a distressing saga lasting over 2 years.
TAX CASE # 3 INCOME TAX:
Battle waged against HMRC results in client saving over £57,000
Summary of Case: March 1993
3.1 Taxation liabilities issued by HMRC (Hammersmith District) as at 2 March 1993 stood at £95,132.51; these were based on accounts prepared by a firm of Chartered Accountants who had acted for this client for a period of 15 years.
3.2 The client had suffered a shortage of liquid funds and was unable to settle the liabilities of £95,132.51 for the years 1989/90 to 1992/93 due to the collapse in the property market.
A “Statutory Demand” was issued to the client by HMRC in Worthing, Sussex, which would be followed, within 30 days, with “Bankruptcy” proceedings in the “High Court” if the settlement was not made.
3.3 Following the appointment of James Wright & Co on 2 March 1993, representations were made to both HMRC (Hammersmith District) and the “Collectors” in Worthing and an application was made under Section 33 Taxes Management Act 1970.
3.4 The accounts prepared by our predecessors, for the four years to 31 March 1992, were withdrawn and re-prepared by James Wright & Co before being submitted to HMRC for their agreement.
3.5 HMRC (Hammersmith District) rejected the accounts as the proposed liabilities were over £55,000.00 less than they expected and started a formal enquiry for the four years.
3.6 After several meetings with the “District Inspector” the “Investigation Manager” and the Inspector assigned to the case, a letter dated 4 October 1995 arrived confirming a liability of £37,582.00 as being agreed by HMRC (Hammersmith).
3.7 The final settlement represents a difference of £57,550.51 and also gave the client two years and seven months to make the settlement to HMRC, thus saving the client from the sure bankruptcy faced in March 1993.
TAX CASE #4 VALUE ADDED TAX (VAT):
VAT Assessment of £4,734.61 withdrawn on appeal!
Summary of Case:
4.1 Following a routine VAT inspection, a letter detailing a number of anomalies was received on 7th February 2001 requesting detailed information and documentations going back to 1 April 1997 together with an assessment for £4,734.61
4.2 Letter dated 20th April 2001 received from HMRC London confirmed that no action would be taken to enforce the assessment of £4,734.61 following our representations addressed to them on 9th April 2001.
4.3 Letter dated 31 October 2001 from HMRC, District 30; RBS London VAT 2 confirmed the withdrawal of £4,734.61 and agreement to our representations.
TAX CASE # 5 INCOME TAX:
Tax Planning resulting in a refund of £26,550.89
Summary of Case: December 2007
5.1 Appointed (by recommendation) to act for a restaurant proprietor who had the same “Chartered Accountant” in North London for 25 years; notified HMRC (Lothians Area) on 21st December 2007 of our appointment and of our intention to seek remedy under “Section 33 Taxes Management Act 1970.”
5.2 Our claim was initiated on 21 December 2007 for the years 2000/01 to 2005/06; however in a letter dated 25 April 2008, HMRC argued that 2000/01 and 2001/02 were out of time although they were prepared to accept the other four years.
5.3 On 16 June 2008 HMRC finally conceded to accept all six years following an appeal and a net sum of £26,550.89 was repaid to our client for the six years. The savings were only restricted because of “Statutory Limitations” and our client’s previous accountant neglected planning opportunities which could have saved over £100,000.00
5.4 This case involved restructuring the business vehicle and implementing other tax planning strategies to significantly reduce all taxation liabilities going forward.
TAX CASE #6 CORPORATION TAX:
Corporation Tax reduced from £70,400 to £13,397.27!
Summary of Case: November 2006
6.1 On 29th November 2006 HMRC (Local Compliance, North West and Midlands) commenced an enquiry on the accounts of the company (haulage contractors) by reviewing the two years ended 31 March 2004 and 31 March 2005.
6.2 Detailed correspondence occurred between the accountancy practice and HMRC and in a letter dated 17 March 2009 HMRC (Local Compliance, Large and Complex Business, Coventry) stated their willingness to accept a sum of £70,400.00 in full and final settlement.
6.3 James Wright-Anderson was appointed to deal with HMRC on 20th May 2009 and on that day formally lodged an appeal against the sum of £70,400.00 as notified.
6.4 Following a reply from HMRC dated 4 June 2009, a full case was put to HMRC in a letter dated 12 June 2009 as the two central parts of the case were largely based on “Section 419 (4) ICTA 1988”and Section 115 (1) ITEPA 2003.
6.5 On 1 September 2009 a solution for an acceptable settlement was detailed to HMRC, this was followed by a proposal from HMRC dated 22 September 2009 proposing to agree £10,329.97 and although penalties were not being sought they required interest of £3,067.30 which would result in a total of £13,397.27 instead of £70,400.00.
6.6 A net savings of £57,002.73 was agreed by James Wright-Anderson within a period of five months and on 7 January 2010 a formal letter from HMRC, Large and Complex Business, Coventry thanked the firm ( with the assistance of Julie Prodger) for resolving complex matters.