CTA September Tax Update

Here is a summary of our September Tax Update which can also be seen on the Tax News section of our website.

Estate Tax Planning for Offshore Clients

This client came to us from outside of the UK. The client owns some properties in London that have increased substantially in value over the last 20 years. The client was looking for estate/ inheritance and capital gains tax planning that will allow for the properties to be passed onto their children in a tax efficient manner. Although the client was non resident, they would still be liable to inheritance tax on assets held within the UK. Our team of tax experts were able to put together a tax structure utilising various provisions within the inheritance tax and capital gains tax legislation together with exemptions available to non residents. Upon the implementation of the structure and various time limits being reached, there would be no inheritance tax on the estate at death. The structure would also provide tax planning and asset protection options for the client and their children.

Success on ￡1m VAT investigation dispute with HMRC

This was a case referred to us by another firm of accountants in London. It involved the sale and leaseback of a property worth ￡6m on which an option to tax was exercised. Capital expenditure was incurred after the sale and leaseback and input VAT of ￡98k claimed under capital goods scheme. When HMRC came to check the claim, they found that there was an option to tax in place but no VAT had been charged on the sale. So instead of paying the ￡98k HMRC raised an assessment for ￡1.2m (20% of ￡6m). After reviewing the case and fact finding, we found that the option to tax was invalid from the outset as it was meant to be made after the sale had completed and that the accountants had made a mistake by backdating the claim to before completion. This argument was put forward to HMRC officers who had to consult with HMRC’s Policy Unit. The Policy Unit did not agree with our points raised and did not respond to our list of points raised or evidence provided. After several exchanges of correspondence  Read more...

Clavis Tax Avoidance Scheme Fails

This was a widely marketed tax avoidance scheme that was being sold at premium fees by several accountants in the country. The scheme allowed directors to get large reserves out of the company with none or minimal tax implications. The scheme also used artificial methods including offshore companies to reduce the corporation tax. The promoters boasted about the scheme having had been approved by leading tax counsel. HMRC challenged the Clavis scheme and have been successful. The main Clavis company has now closed down. Taxpayers who had used the scheme have now been left with tax to pay and have also lost the premium fees that they paid to Clavis. Churchill Tax Advisers is now assisting people who had used the scheme and reaching a settlement with HMRC. If you have been using the scheme and have recently been contacted by HMRC, please contact us to discuss your options.

HMRC Let Property Campaign – Undeclared Property Income

HMRC continue to send out letters to landlords who have undeclared rental income. We have been approached by clients who have received these letters and are in the process of preparing a full disclosure to HMRC. The letters give the landlords an opportunity to make a full disclosure for all the years where the rental income was not declared. This letter is a form of a tax investigation that is being started but giving the landlord the opportunity to make a disclosure. If the letters have come from HMRC and no prior contact/ disclosure made by the tax payers, the penalties are higher as this will be treated as a prompted disclosure. Churchill Tax Advisers have previously written a technical article on the Let Property Campaign Read more...

HMRC publishes details of tax fraudsters prosecuted and jailed

HRMC have published details of several tax fraudsters that have been convicted and jailed recently. The published details include the full name, date of birth, photograph and the residential address of the convicted individuals. A few of these are summarized below:

1-   A call centre worker from Swansea, who set up a company to sell men’s designer underwear as a front to steal more than ￡50,000 from taxpayers through a VAT fraud, has been jailed. Daniel King, 37, set up his company, D-briefed, in October 2013 and told HM Revenue and Customs (HMRC) investigators he intended to import the underwear from China to re-sell over the internet. Read more

2-   A Hampshire property landlord, who failed to declare Capital Gains Tax from the sale of properties evading ￡157,725, has been jailed for two years and three months. Richard Fuller, 53, was arrested at Gatwick Airport in October 2014 after a holiday to Turkey. An investigation by HM Revenue and Customs (HMRC) revealed that between 2006 and 2013, he didn’t declare profit gained from selling properties Read more

3-   A Rochdale businessman, who pocketed nearly ￡1.25 million from two VAT frauds, has been ordered to repay almost ￡400,000 or face another four years in jail after an investigation by HM Revenue and Customs (HMRC). Mubbashir Alam, 42, of Maldon Street, set up eight fake clothing companies in a deliberate attempt to claim false VAT repayments. He was originally jailed for the fraud in November 2014, he now has to repay the stolen tax within three months or he goes back to jail for four years and still has to pay. Read more

4-   HM Revenue and Customs (HMRC) has collected more than ￡4 billion through the ‘pay now, dispute later’ rules for people who have used a tax avoidance scheme. More than 75,000 accelerated payment notices (APNs) have been issued to people under enquiry for tax avoidance since rules were introduced in 2014. And HMRC has now issued APNs on all the schemes that were already under investigation when the new rules came in. Also, the High Court has now confirmed that HMRC had won another Judicial Review of the APN regime – the department has now won six out of six Judicial Reviews. Read more

Churchill Tax Advisers have helped a large number of clients come forward and make a voluntary disclosure of undeclared income to set their affairs right. Our advice is that tax fraud will ultimately get caught. Living constantly with the fear of ultimately getting caught can be psychologically damaging and can impact personal life. We specialize in voluntary disclosures and will ensure that the process is as pain free as possible for our clients.

First Tier, Upper Tribunal and Court of Appeal Cases

Butt v R & C Commrs [2017] BVC 525

The Upper Tribunal (UT) dismissed the appeal against the decision of the First-tier Tribunal (FTT) ([2015] TC 04668) that the director was liable to a penalty relating to Missing Trader Intra Community (MTIC) fraud. The director had dishonestly participated in the fraud. The company’s conduct was wholly attributable to the dishonesty of Mr Butt and his fellow director. This is another victory for HMRC in their long battle against MTIC fraud. Section 60 provides that a person who has dishonestly done something or omitted to do something for the purpose of evading VAT is liable to a penalty equal to the amount of VAT evaded or sought to be evaded.

R & C Commrs v Languard New Homes Ltd; DD & DM MacPherson v R & C Commrs [2017] BVC 522

The Upper Tribunal (UT) allowed an appeal by HMRC against a decision of the First-tier Tribunal (FTT) in respect of Languard New Homes Ltd (Languard) and dismissed an appeal by DD & DM MacPherson (MacPherson) against a decision of the FTT. In both cases the subject was whether the first grant of a major interest in a converted property was zero-rated and the UT decided that in neither case did zero-rating apply.

Llamas (t/a Salinas Café Ltd) [2017] TC 05935

The First-tier Tribunal (FTT) dismissed an appeal that HMRC had not exercised best judgment in respect of assessments made under VATA 1994, s. 73(1). The FTT also found that the appellant had no reasonable excuse for penalties issued in respect of the same assessments but that they were the result of careless rather than deliberate behaviour.

Tomlinson [2017] TC 05943

The First-tier Tribunal (FTT) found that a double glazing salesman was self-employed and not an employee as the salesman had claimed.

Trowbridge Office Cleaning Services Ltd [2017] TC 05938

The First-tier Tribunal (FTT) found that HMRC had failed to issue valid determinations under the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), reg. 80 and therefore allowed the appeal against the determinations and the related penalties.

Eastern Power Networks plc [2017] TC 05948

The First-tier Tribunal (FTT) directed HMRC to issue closure notices in respect of enquiries into claims for consortium relief; and in reaching its decision, determined that CTA 2010, s. 146B did not apply because the consortium members did not have ‘control’ of the consortium company (or its subsidiaries, which were the claimant companies).

Please feel free to contact me if you wish to discuss any particular tax issue.

Please visit our website www.churchilltax.com for further details.

Kind regards, 

Jamal Khan - CTA, FCCA

Director - Churchill Tax Advisers

Tel: 0207 998 1834/ 0207 993 8452. Email: [email protected]