Tax investigation closed through Contractual Disclosure Facility (CDF)

This client came to us from the Midlands and was already under a tax investigation for failing to disclose income. We considered the merits of the case and suggested that a full disclosure under Contractual Disclosure Facility (CDF) would be the most effective way to conclude matters in contrast to a lengthy exchange of correspondence with HMRC inspector resulting in tax and high professional fees. The proposal was put forward to HMRC inspectors and they agreed to receiving a CDF. A full CDF submission was prepared and submitted which was fully accepted by HMRC. The tax and penalties payable as a result were quite minimal compared to what had initially been estimated. We are grateful to HMRC officers involved for their cooperation and support.

Our analysis: This was an interesting case where our firm and HMRC worked in cooperation to bring an early and effective closure to a tax investigation. Had the conventional route of entering into prolonged correspondence and dispute been entered, this would have taken significantly longer and cost the client more in professional costs, tax and penalties etc. Although the CDF route may not be applicable in all circumstances but it is very useful to be able to identify the right strategy when approaching a tax investigation.

Large VAT investigation successfully closed after 9 months with no tax to pay

This client is based in Essex and provides transportation services. The client had received a VAT investigation going back four years and HMRC were initially asking for a substantial tax amount together with penalties and interest. Our tax specialists considered the case in depth a found that the basis of VAT assessments raised by HMRC were incorrect. We sent our technical analysis together with supporting documentation to HMRC. Initially, HMRC refused our technical position and requested further supporting documentation. After several exchanges of technical correspondence the HMRC officers accepted that our position had been correct from the outset and that no tax was due by our client. To make matters even better, HMRC accepted that our client was due a tax refund. We are grateful to the HMRC officers involved in this case for their practical approach towards resolving this fairly complex matter.


Our analysis: This case could have dragged on for a long time and is a good example of cooperation. The main factors for early closure were establishing a good relationship with the HMRC inspectors and providing the required information in an effective manner.

HMRC’s VAT and Customs investigation closed after one meeting

This client runs a retail outlet in London and had received a VAT and Customs investigation from HMRC. The client was naturally quite nervous despite being up to date and having paid all their taxes due. Our tax specialists reviewed the client’s records in depth and proposed to meet with the HMRC inspectors. The meeting lasted for approximately an hour and soon HMRC officers accepted that there were no major issues with the company’s VAT and Customs liabilities and that the client’s arrangements were in good order. This was subsequently confirmed in writing by HMRC. We are grateful to the HMRC officers involved for their quick understanding of our client’s business and their pragmatic approach bringing the enquiry to a closure.


Our analysis: This was an interesting case where our firm and HMRC worked in cooperation to bring an early and effective closure to a tax investigation. We have seen numerous cases where due to the wrong or defensive stance taken by ordinary accountants, the relationship is tarnished and causing irreversible damage to the enquiry.

Worldwide Disclosure Facility – Closing on 30 September 2018

The Worldwide Disclosure Facility was initiated by HMRC in 2016 to allow tax payers with offshore (non UK) income to make a full disclosure and avoid large penalties or HMRC prosecution. The disclosure facility has been widely used by UK and non UK residents and settlements reached for tax payable. HMRC had announced that the  Worldwide Disclosure Facility will be closing on 30 September 2018. This means the option to make a disclosure at a lower penalty will no longer be available.  From 1 October 2018, individuals with undeclared offshore income will need to make a disclosure through Requirement to Correct rules. The new rules under Requirement to Correct will impose heavier fines and sanctions.


Any non UK citizens living in the UK are required to make a full declaration if they are receiving offshore income even if that is being kept offshore and not brought into the UK.

As we are approaching the deadline of 30 September 2018, we have received a large number of queries from people wanting to make a full declaration to HMRC and to avoid the harsher penalties from 1 October 2018. If you would like to discuss making a declaration under the Worldwide Disclosure Facility, please contact us on 0207 998 1834.


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.