Tax Appeal lost for undeclared sales

Aziz [2018] TC 06405

The First Tier Tribunal has decided to uphold the income tax, national insurance and VAT assessments including penalties as issued by HMRC. The appeal was filed by the appellant following HMRC’s investigation including covert/ undercover inspections. HMRC’s covert tests revealed that the appellant had not been fully declaring his sales. Initially HMRC had set the penalties very high for deliberate behaviour. Following prolonged negotiations by the representatives, HMRC agreed to reduce the penalties to 19.8% under careless behaviour.

Jailed after Tax Fraud Investigation

A businesswoman, Claire Gould, resident of Houghton Le Spring has been jailed for VAT fraud. Ms. Gould used fake invoices to claim back VAT of £175,000 from HMRC. Her fraud was uncovered after an investigation by HMRC’s specialist team. She has received a confiscation order of £80,509 but has only paid back £7,000. If she fails to pay the confiscation order within two months, she will face another eighteen months in prison. Read more..

Jailed for Tax Fraud

1-    John Hamill, resident of Stwarton, Ayrshire trading as a recycling consultant has been jailed for tax fraud after steeling more than £309,000 in tax. Mr. Hamil worked as the owner of GH Consulting from his home. He made profits of £1.3m from 2006 to 2014 but did not register or pay his tax due. On 3 April 2018, at Kilmarnock Sheriff Court, Mr. Hamil pleaded guilty to Income Tax fraud. He was sentenced to twenty one months in prison. Read more..

Corporation Tax Investigation Closed

This case was referred to us from another accounting firm in London. The case related to a retail company and there was a dispute on some large items that had been claimed in the tax return. The HMRC inspector disagreed with the deductions and had disallowed these resulting in a significant tax liability together with large penalties. The case had been going on for over 3 years before our firm was appointed. Our tax investigation specialists met with the HMRC officers involved and after long discussions and negotiations agreed that full relief will be allowed for the expenses claimed. The relief was split into revenue and capital portions which meant that the client will get relief in two stages compared to no relief before the case came to us. The final settlement meant that the tax demand from HMRC was significantly reduced and the penalties were cancelled. Our firm is grateful to the HMRC officers involved for their cooperation and understanding our client’s position.

Our analysis: This case came to us after roughly three years of the initial enquiry letter. During this period, various areas of dispute arose and matters kept getting worse not mentioning the professional costs that were incurred. After we took on the case, it took us a few weeks to resolve matters and close the case. Our advice has always been to appoint a specialist as early as possible to reach a quick and pain free resolution.

Large VAT and Corporation Tax Investigation Closed

This case came to us from an accounting firm in London. After the client received the tax investigation letter from HMRC, their accountants absconded and closed their offices and stopped taking any calls or letters! The client was ultimately referred to our firm. There had been errors in the VAT returns and the accounts with respect to the level of income declared. The HMRC enquiry comprised VAT, corporation tax and self assessment for the director. In total HMRC were seeking over £350k. We spoke to our client in detail in relation to the level of business and activities including the sales trends. Our client accepted that they had been misled by their accountants and as a result had paid less tax. However, the level of sales estimated by HMRC were substantially higher than the actual sales over the previous several years. This meant that the tax assessments raised by HMRC were much higher than the actual liability. Our team of tax investigation specialists referred the case to Alternate Dispute Resolution (ADR) to present our client’s case prior to going to the First Tier Tax Tribunal. After seven hours of discussions and negotiations in the ADR meeting with HMRC and ADR facilitators, we finally reached a settlement of roughly 25% of the original amount being assessed. Our client was happy to accept this figure and HMRC also accepted that the quantum of sales omissions were not as high as initially estimated. A written agreement was reached at the end of the meeting and both parties walked out happily. Our firm is grateful to the HMRC officers (including senior officials) involved in the ADR meeting for their level of cooperation, understanding our client’s position and keeping an open mind in relation to the facts.


Our analysis: This was a rare case where an accountant had absconded after their client received a tax investigation letter. The level of irregularities conducted by the accountant as described by the client were disturbing and shocking both for our firm and HMRC. Our firm tried on many occasions to contact the previous accountants but their office was closed. We have come across a number of situations where a tax payer has got into significant problems due to negligence by their accountants. It is sad to see that a number of businesses do not carry out due diligence before appointing an accountant and are mainly focused on the lowest possible fee in the market where quality of work is significantly compromised. The same people then pay a lot more in taxes, penalties and professional fees after being investigated by HMRC.

Cyclops Electronics UT/2016/0193

The Upper Tribunal has decided in favour of HMRC in relation to the multi-million pound tax avoidance scheme promoted by Cyclops Electronics and Graceland Fixing and used by over a hundred other businesses. In summary the businesses involved in the scheme used loan notes to pay bonuses to company directors with a view to avoid paying tax and National Insurance. A number of companies were created to issue the loan notes with special condition and were designed to match the bonuses. The scheme was designed to make use of loopholes in the legislation but these have now been closed. This win by HMRC is expected to collect over £55 million in tax. This was another example of heavily marketed tax avoidance schemes (backed by counsel opinion) that has failed. We have written several times previously about how one should avoid entering into these artificial schemes that are only likely to fail in courts. If you were a victim to this scheme and would like professional help in resolving your position with HMRC, please contact us and we will be happy to help.

Free Webinar on Tax Investigations 28 March 1pm

After our successful seminar on 28 February 2018 at Doubletree Hilton, Holborn, London, we have been requested by a large number of candidates to host regular webinars in relation to tax investigations and various technical tax issues. Our first webinar will be held on 28 March 2018 at 1pm and will cover detailed insight into “Tax investigations and how to get these closed effectively”. If you would like to attend the webinar, please register your interest at The webinar will count towards your CPD if this is relevant to you.

Security company boss jailed for tax fraud of £500,000

Jonathan Benjamin Schofield, 32, a boss of a security company, has been jailed for three years after being involved in tax fraud of almost £500,000. He cheated the HMRC by underpaying VAT, income tax and national insurance. During the tax investigation by HMRC, Mr, Schofield failed to attend several meetings and did not cooperate in any way. On the contrary he continued enjoying his lavish lifestyle which he earned through tax evasion. A confiscation order has been made to recover the tax he stole and will include the sale of his assets/ properties. Read more..

Serious tax investigation closed

This case was referred to us from another accounting firm in London. The client had been under enquiry for some time for undeclared income relating to the main business. HMRC’s focus was that the business had undeclared sales and that the director had been pocketing the cash sales to fund his living costs. Our tax investigation specialists considered the case in depth and how the business sales had been recorded and declared in the VAT and corporation tax returns. We also considered how the director’s lifestyle had changed over the years which showed that in reality our client’s financial position had deteriorated as the business was struggling. This was proven by way of a capital statement presented to HMRC. After HMRC concluded the enquiry for the business where some additions were made to the sales, HMRC accepted our case that there were no changes required to the director’s self assessment tax returns. The director had initially been advised that there would be a significant amount of tax and penalties payable and that he may be made bankrupt. However, after our successful negotiations, the enquiry was closed with no tax to pay. Our team at Churchill Tax Advisers is grateful to the HMRC officers involved in the case for understanding and accepting our client’s deteriorating financial position.


Our analysis: This case was referred to us after the client had been badly let down by their previous accountant. The enquiry was connected with another enquiry into the director’s limited company where HMRC suspected undeclared sales which our client blamed on the previous accountant. In our experience people get what they pay for in terms of accounting services and the quality of work done. Each time we receive a tax investigation case from another accountant, we notice a common trend of trying to pay the lowest possible accountancy fee and hence receive bad advice before they are investigated by HMRC. After the investigation, most businesses pay significantly more in fees, taxes, penalties and possible prosecution (which taxpayers normally attempt to blamed on their former accountants but it does not help their case).