fbpx

HMRC Miss Tax Avoidance Target By Raising Assessments Too Late

29th October 2019 By Arman Khosravi

When HM Revenue and Customs (HMRC) find out that tax has been under-declared, the response is normally to raise a ‘discovery assessment’ to collect the tax due. This is usually the result of a period of investigation, and penalties and interest are also levied.

When HMRC discovered that a Stamp Duty Land Tax (SDLT) mitigation scheme had been entered into by thousands of people, the response was to issue discovery assessments to all those involved.

Curiously, however, a group of six people did not receive any assessments until many years later. They then wished to appeal against the assessments on the ground that they were ‘stale’ – too late to be valid. HMRC’s stance was that the time at which this could be done had passed and the assessments should stand, although in another twist, HMRC had given two of the taxpayers (a husband and wife) permission to appeal out of time.

Eventually, HMRC accepted that the six had not received their assessments until many years after they were purportedly made and agreed not to object to the appeals being heard even though they were late.

Therefore, the questions that faced the First-tier Tribunal (FTT) were:

  • Were the assessments ever actually made?
  • If they were made, were they ever actually issued? and (with regard to one taxpayer)
  • Was the ‘discovery assessment’ validly made?

The FTT considered carefully the evidence regarding the making of the assessments by HMRC and concluded they had been made, but not validly delivered, in 2013. However, HMRC’s failure to deliver them to the taxpayers until 2018 rendered them invalid. In any event, the time would have begun to run on the taxpayers’ rights of appeal only when the assessments had been validly served.

The taxpayers were in luck. HMRC’s failure to follow their own procedures properly meant that the taxpayers had not been served with the relevant assessments until it was too late for them to be valid.

One of the interesting aspects of the case is that it highlights an HMRC tactic. The judge put it thus: ‘HMRC had a unit looking at identifying SDLT avoidance. It concentrated on SDLT returns made by taxpayers who had instructed agents which HMRC considered had implemented SDLT avoidance schemes. HMRC obtained the relevant Land Registry returns and looked for discrepancies between the declared price paid on Land Registry forms and on the SDLT returns of those taxpayers.’

HMRC are on the lookout for firms that run tax avoidance schemes and that seem to represent the sort of client that ‘takes liberties’.

Source: Concious

Latest News

Relationship Status Put Under Spotlight in Divorce Case

26th February, 2024 By

Divorce proceedings are rarely cut and dry, especially where the passage of time adds complexity to matters. This was certainly so in a recent case that required a Family Court judge to rule on the validity of a decree nisi. The case centred on the divorce proceedings of a couple in their fifties and focused on a decree nisi that had been pronounced in 2012, following an application by the husband. Now seeking to finalise the divorce with a decree absolute, the husband asserted that the decree nisi had been properly...

Will Execution – Remote Witnessing Legislation Expires

22nd February, 2024 By

A legal amendment that was made during the COVID-19 pandemic allowing the witnessing of wills to take place via videoconferencing has officially expired. As of 31 January 2024, the Wills Act 1837 (Electronic Communications) (Amendment) (Coronavirus) Order 2020 is no longer active. It was introduced in response to the pandemic, as a means of facilitating the valid execution of wills via remote witnessing. The Order applied to wills made between 31 January 2020 and 31 January 2022, but was later extended to 31 January 2024. Section 9 of the Wills Act...

Psychotherapy Condition Leads to Contact Order Appeal

20th February, 2024 By

Wherever possible, the courts will do what they can to support contact between parents and children but, in some instances, that contact comes with conditions attached. The nature of such conditions was the cause of contention in recent appeal proceedings brought by the father of two young boys. The man appealed against a High Court order that allowed for contact periods with his children, which would progress from supervised to unsupervised and increase in length but were dependent upon him engaging in psychotherapy. This condition had been imposed following a...

Beware of Builders Offering Cut-Price Work – Court of Appeal Cautionary Tale

16th February, 2024 By

Every householder should understand the dire risks involved in opening their doors to those promising to carry out cut-price building work. A Court of Appeal decision provided distressing examples of almost the worst that can happen. A householder approaching retirement age was taken in by a workman who knocked on his door, offering to paint the front of his home for £1,000. He was introduced to another man – the offender – whom the workman described as his business partner. The pair proceeded, over a period of months, to carry...