Tax Fee Protection

Furniture wholesaler subject to an HMRC Full Enquiry

HMRC commenced an enquiry, which later extended into the Directors personal returns and did not complete until over two years later. During that period there were numerous exchanges of correspondence and meetings with HMRC. At one-point HMRC indicated that the liability to additional tax could exceed £200,000, by the conclusion of the enquiry additional tax of £20,000 was agreed. Accountancy fees exceeded £25,000.

Self-employed consultant subject to a Full Enquiry

HMRC requested all of the books and records and then raised questions regarding self-employment income, rental income and income from employment. At the conclusion HMRC identified approximately £12,000 of underpaid tax, due to overstated expenses which were as a consequence of bookkeeping errors made by the client. However, HMRC accepted a negotiated settlement of £6,000. Accountancy fees exceeded £5,000.

Property developer subject to a VAT Compliance Review

Following a VAT compliance review it was determined that given that the client was making both exempt and VAT able supplies, they should not have recovered 100% of input tax in previous years. The client’s accountant successfully disputed the assertion on the basis that the client was below the partial exemption de minimum limit, avoiding a potential liability in excess of £20,000. Accountancy fees of £3,500 were incurred.

High Net Worth Individual targeted by HMRC

Enquiries were opened into the 2016 amended and 2015 self-assessment tax returns and covered income from self-employment, foreign property, loan interest relief and capital gains arising on the sale of shares, futures and options. Fees were incurred meeting the client and HMRC and exchanging extensive written correspondence in response to complex technical issues. At the conclusion it was deemed by HMRC that no significant adjustments were

required. Accountancy fees of £10,000 were incurred.

Building contractor subject to a Full Enquiry, PAYE & VAT Compliance Visit

HMRC targeted a group of companies, opening full enquiries into each of the group member’s tax returns, including the group Directors personal tax returns, as well as undertaking a PAYE and VAT Compliance Review. More than £10,000 of accountancy fees was incurred providing the books and records, submitting further detailed information in respect of each of the entities under enquiry and attending long and detailed meetings with HMRC. On completion, it was concluded by HMRC that no significant adjustments were required.

Husband and wife subject to an HMRC Aspect Enquiry

A husband and wife had a portfolio of four properties, and each received an aspect enquiry notice under S9a TMA 1970. HMRC challenged the rise in expenses for one year. The Husband and Wife, had to evict one tenant due to nonpayment of rent and damage to the property. All details of the expenses were provided and HMRC then challenged whether the expenses should be treated as capital or revenue expenses. As they had taken photographs of the damaged property and with the expenses/ invoices were able to satisfy HMRC. Each received a small repayment.  Fees of £3,000 were paid in full by the Tax Fee Protection Policy.

FAQ’s

I’ve done nothing wrong, why should I worry about a tax enquiry?

The majority of tax enquiries are now generated by computer “risk profiling” while others are selected completely at random. As a result, HM Revenue & Customs (HMRC) sometimes picks the wrong targets. Even if you have done nothing wrong, the taxman will not give up and will still try hard to find errors.

Can anyone’s tax affairs be scrutinised by HMRC?

Anyone who submits a tax return can come under scrutiny. Every year, HMRC start enquiries into many thousands of personal and business tax returns and accounts. VAT and PAYE payments are also thoroughly checked. The aim in every case is to collect more tax. A record £34bn of addition tax was collected through compliance checks in 2022/23, up 10% compared to the previous year.

I want to reduce my spending in the current economic climate.

Not paying for our fee protection service could be a false economy. The potentially high costs of defending you in an enquiry would be much less affordable than the small annual charge. One thing is certain – HMRC does not stop making enquiries into tax returns when there is an economic downturn. The amount of debt the government is in at present is only likely to increase the potential threat of an HMRC enquiry!

Why do I need protection?

Like any other protection to meet an unexpected cost, everyone hopes that they don’t need it but when a costly enquiry starts, clients are glad that they’ve paid the small annual charge for the peace of mind it extends in the event of an investigation.

Why isn’t cover through a trade subscription such as the FSB, sufficient?

Such cover will normally limited and not as wide ranging as the practice service. Such policies may not pay our fees to look after you and may instead bring in an outside consultant who does not know your specific circumstances.

How much could a tax enquiry cost me in professional fees?

The questions asked by HMRC are usually very detailed and time consuming to answer. The cost of defending you can easily run to thousands of Pounds, even if little or no additional tax is due as part of the enquiry. These costs are not protected by your fee agreement with us.

Is there anything I can do to ensure peace of mind?

You can subscribe to our Fee Protection Service which will protect you for the work and costs of defending you in the event of an enquiry by HMRC.

What is the Fee Protection Service?

It is a service provided by us in conjunction with Vantage Fee Protection (VFP) to protect clients in the event of an enquiry by HMRC. The service is backed by an insurance policy that the practice has arranged though VFP. When you subscribe to this service, we are able to make a claim against our insurance policy held with VFP in respect of the fees incurred.