Taxes Management Act 1970 Section 9a

The Taxes Management Act 1970 Section 9a

Taxes Management Act 1970 Section 9a

What is ‘Section 9a, Taxes Management Act 1970’?

‘The Taxes Management Act 1970 Section 9a’ is the name of the legislation that gives HMRC the power to investigate a taxpayer’s tax return.

HMRC can use TMA 1970 Section 9a to commence and enquiry up to 12 months following the filing of a return. You will sometimes hear such an enquiry referred to simply as ‘a section 9a enquiry’.

What should I expect during a Section 9a enquiry?

As part of HMRC’s investigation, it may request copies of business records, ask for a meeting with the taxpayer, or both.

We specifically recommend that clients DO NOT attend any meetings with HMRC. It’s our advice that all communication should be conducted via written correspondence.

Written correspondence provides a much more accurate record of what has (or hasn’t) been said. This is particularly useful should we need to appeal any HMRC decision at First Tier Tax Tribunal.

In addition to this, meetings with HMRC often result in ‘fishing expeditions’. HMRC routinely attempts to obtain all manner of seemingly irrelevant information.  The taxpayer then sees this information used against then later in the enquiry.

Under TMA 1970 Section 9a, there is no requirement for a taxpayer to attend a meeting with HMRC.

We can resist any requests made for information by HMRC where we feel the information requested isn’t relevant. This is done by inviting HMRC to issue a ‘Schedule 36 Information Notice’ – a formal request for the information. The Schedule 36 Information request itself can then be challenged by us at First Tier Tax Tribunal.

Concluding a Section 9a enquiry

Following HMRC’s enquiry, one of three things usually happen:

HMRC is content with the information provided and no further action is taken (this is rare).

Following the ‘Section 9a Enquiry’ HMRC undercovers one or more less serious inaccuracies that will need to be addressed.

The enquiry results in HMRC finding one or more deliberate or non-deliberate inaccuracies. In this scenario it will likely launch a full tax investigation under Code of Practice 8 or Code of practice 9.

It’s worth remembering that HMRC doesn’t have the last say in any tax decision. For example, First Tier Tax Tribunal can overturn any HMRC decision.

If the thought of attending Tribunal makes you feel uneasy, don’t worry. We can handle everything. From filing the initial appeal, all the way through to representation on the day. You can find additional information regarding Her Majesty’s Courts and Tribunals Service on the ‘.gov’ website by clicking here.

It’s even possible to use HMRC’s own procedures to guarantee immunity from criminal prosecution – in cases of deliberate tax fraud. A voluntary disclosure under Code of Practice 9 offers complete immunity from criminal prosecution, in return for a full disclosure.

What should I do if I have a Section 9a enquiry?

An enquiry under the Taxes Management Act 1970 Section 9 can lead to something more serious. Seeking professional advice immediately can stop matters getting out of hand.

Whether you don’t believe you’ve done anything wrong, are aware of non-deliberate inaccuracies or have deliberately falsified your tax return, we can help.

At T M Sterling, we offer a free initial consultation to anyone who needs to speak to an expert. We can talk through the Taxes Management Act 1970 Section 9a and the various options available to you. You’ll then have specific and actionable advice that you can use moving forwards.

Call us today on 01656 724806 or send us a message to arrange a free consultation. What do you have to lose?

HMRC Let Property Campaign

HMRC Let Property CampaignWhat Is The HMRC Let Property Campaign?

The HMRC Let Property Campaign is a facility that allows landlords to declare previously undeclared income from renting out property (letting income).

Who Can Make a Disclosure Under the Let Property Campaign?

You can make a disclosure under the ‘Let Property Campaign’ if you…

  • Rent out a single property
  • Rent out a portfolio of properties
  • Are a specialist landlord, e.g. student lets or contractor accommodation providers
  • Live abroad and rent out a property in the UK
  • Live in the UK but rent out property overseas
  • Rent out a property you live in part of the time e.g. a holiday home

Who Can’t Make a Disclosure Under The Let Property Campaign?

The let property campaign can’t be used if your renting property though a company or trust. It also can’t be used if you rent out commercial property.

Why has HMRC launched the Let Property Campaign?

HMRC has taken a particular interest over the last few years in residential landlords. Specifically, those who aren’t currently, or have never, declared income from renting out residential property.

This is partly because of the rule changes around being able to claim mortgage interest as an allowable expense for tax purposes. By 2020 landlords won’t be able to claim any interest on mortgage repayments. With this change alone, it could be argued that landlords are more likely than ever to try to avoid paying tax on rented properties.

Bad News For Landlords Whom Avoid Tax…

The tools used by HMRC in an attempt to catch landlords are more sophisticated than ever. HMRC now has a £1 billion ‘super computer’ that collects data from many different sources. These are sources such as land registry records for example.

It doesn’t take much imagination to see how the computer may  come in useful. For example, it might see someone’s name listed against several properties. I might then forward the information to a HMRC case worker for further investigation.

What To Do Next

If you’re a landlord and have undeclared property income, then call us today. We’ll talk you through the various options (such as the ‘let property campaign’) and help to identify the best way forwards.

T M Sterling are experts in managing complex tax problems. We help clients across the UK to get their taxes back on track. If you have questions regarding the HMRC Let Property Campaign or any other tax related issue then please get in touch. Simply use the ‘Contact Us’ link at the top of our website – www.tmsterling.co.uk

Tax Avoidance Scheme Help

Tax Avoidance Scheme Help

Need Tax Avoidance Scheme Help?

Reliable tax avoidance scheme help can be hard to find. This article will give you a useful over view of HMRC’s view of tax avoidance schemes. If you require specific help regarding your situation then please get in touch.

Although there are many different types of Tax Avoidance Scheme, one of the most common is the ‘Contractor Loan Scheme’. This is when the person who has entered into the scheme receives ‘loans’ via the scheme operator. In theory, as the amounts received are loans and not remuneration then this is not income and is therefore not taxable.

In reality, because these loans are never actually repaid, HMRC classes them as ‘disguised remuneration’ and are therefore liable to tax.

Two Common Myths Regarding Tax Avoidance and Contractor Loan Schemes

‘My Scheme Was HMRC Approved’

This is incorrect. Although you may have been led to believe otherwise when you chose to enter the scheme, HMRC has never approved any tax avoidance scheme to date. It’s simply not in their best interest to do so.

‘I Was Told That I Didn’t Have To Declare My Scheme’

Again, this is incorrect. All Contractor Loan Schemes are must be declared to HMRC. When a scheme is declared it is given a scheme reference number. The promoter of the scheme must provide this number to anyone who uses it.

Help From The Tax Avoidance Scheme Provider

Unfortunately, many of the companies that provided the tax avoidance schemes to users are no longer around to pick up the pieces. Some have simply shut up shop, whilst others have entered bankruptcy or voluntary liquidation. This is of little help to the user of the scheme, who’s left to deal with HMRC alone.

HMRC Deadline

HMRC has recently highlighted 30th September 2018 as a deadline for notification. If users of Tax Avoidance Schemes don’t provide the necessary details to HMRC by this deadline then there are likely to be in a much less favourable position.

HMRC has indicated that it intends to ‘punish’ users whom don’t declare their involvement by incorporating all years for which the scheme was in place into a single tax year. Therefore, this could leave many users with massive tax liabilities.

Follower Notice

Once a tax avoidance scheme fails i.e. a court rules that the scheme represents disguised remuneration, HMRC may then issue a ‘Follower Notice’ the anyone whom has entered into a similar scheme. This is essentially HMRC requesting that you rectify your tax affairs.

Failure to comply with the follower notice is likely to result in a penalty of 50% of the tax due.

Next Steps

If you need advice concerning a Tax Avoidance Scheme and wish to speak to an expert, please get in touch. You can do this by clicking the clicking the ‘Contact Us’ link at the top of our website – www.tmsterling.co.uk

How Far Back Can HMRC GO?

How Far Back Can HMRC Go?How Far Back Can HMRC Go?  

So, you’ve probably been asking yourself ‘How far back can HMRC go?’. This varies greatly. Depending on the nature of the error it could be as much as 20 years.

Careless – 4 years

If HMRC finds an error resulting from ‘careless’ behavior then the maximum it can go back is 4 years. This is an error that it considers has been brought about by an innocent mistake.

As an example, let’s take Mr Smith. Mr Smith lives in London and simply missed a ‘0’ off the end of his dividend income when completing his self-assessment return. HMRC are likely to consider this careless.  Therefore HMRC can only ‘go back’ 4 years when looking at his tax affairs.

Negligent – 6 years

If HMRC believes that someone’s ‘negligence’ has caused an error, then it can investigate going back a maximum of 6 years.

In this example, let’s looks at Mr Jones. Mr Jones lives in Birmingham and runs a small corner shop with his wife. Mr Jones knows that his wife has very little understanding when it comes to accounts. She’s made several errors previously, but Mr Jones has always insisted that his wife completes his company’s VAT returns.

In this example, HMRC are likely to consider Mr Jones’ actions negligent. This is because he had just cause to be able to foresee errors being made but did nothing to stop this happening. How far back can HMRC go? The behavior is negligent. Therefore, HMRC can review Mr Jones’ tax affairs going back a maximum of 6 years.

Deliberate – 20 years

20 years is the maximum amount of time that HMRC can go back and is reserved for cases of deliberate behaviour. HMRC must be able to prove, on the balance of probability, that the tax loss to HMRC (or potential lost revenue/PLR) has been brought about as a result of deliberate behaviour; the burden of proof rests with HMRC.

Ultimately, if HMRC are unable to convince the First Tier Tax Tribunal that the individuals actions were deliberate then the actions can only be considered ‘negligent’ at most – the timescales and penalty levels will need to reflect this.

In our final example, let’s look at…Mr Singh. Mr Singh is a self-employed builder and his wife has recently had a baby. Much of the work that Mr Singh carries out is paid for in cash, so Mr Singh decides to not declare 25% of his earnings on his self-assessment tax return as the extra money will certainly come in handy.

HMRC subsequently investigates Mr Singh’s tax affairs and discover that things just don’t add up. In this case, HMRC will likely raise tax assessments for the ‘potential lost revenue’ based on what they think Mr Singh owes – whether HMRC are accurate or not is another matter to be discussed separately. How far back can HMRC go in this case? Theoretically, HMRC could go back a maximum of 20 years when raising their assessments (deliberate behavior). This will also impact on the penalty level and interest amounts with this in mind.

Other Implications – HMRC Penalty Levels

As well as the nature of the discrepancy (i.e. careless, negligent or deliberate) influencing the amount of time HMRC can go back, there are also penalty levels to be considered. As you may expect the penalty levels attributed to ‘deliberate’ behaviour is often far greater than ‘negligent’ and ‘careless’ actions respectively.

Therefore, it’s important to not only consider the amount of time that HMRC can legally assess. We must also consider the penalty levels attributed to each scenario. It’s important that you or your representative can effectively convince a tribunal judge that your behaviour was careless as opposed to deliberate. This will not only  ‘save’ on the number of years that can be assessed but also the penalty levels attributed to each year.

Penalty Calculations

To illustrate this, let’s look at one final example. For the past 10 years Mr Williams has underdeclared his income by £20,000 per year. HMRC has therefore raised assessments for 20% of the under declared income for the full 10-year period and added interest charges. HMRC consider Mr Williams actions to be deliberate. So, 10 years x £4,000 = £40,000 + penalty charges @75% = £70,000 + interest charges = £75,000.

Mr Williams’ representative appeals to First Tier Tax tribunal and effectively argues that the actions were careless. Therefore, HMRC are limited to assessing 4 years and to implementing lower penalty levels. Mr Williams’ liability may now look something like this. 4 years x £4,000 = £16,000 + penalty charges at 25% = £20,000 + interest = £21,500.

Ultimately, by being able to argue the Mr Williams’ actions are careless he has saved £53,500!

Clearly, all the example are based on assumed figures – but the principles behind ‘How far back can HMRC go?’ still apply.

If you have a tax problem that you need help fighting, then please call us today and we’ll arrange an initial consultation where we can identify the most effective way forwards.

HMRC Contract Disclosure Facility

HMRC Contract Disclosure FacilityThis article looks at the ‘outline disclosure’ aspect of HMRC Contract Disclosure Facility.

What Is A Contract Disclosure Facility ‘Outline Disclosure’?

You will be issued with the outline disclosure documents in one of two scenarios. A) You or your agent has applied for immunity from prosecution under the Contract Disclosure Facility. B) HMRC suspects that you have committed ‘serious tax fraud’. In this case HMRC has chosen to offer you immunity from criminal prosecution in return for a full disclosure. Full disclosure means giving all information concerning deliberate and non-deliberate tax irregularities.

Contained within the outline disclosure letter there are two key documents. The first is an acceptance notice, the second is a rejection notice. Whether you believe that you have committed tax fraud or not, a CDF letter from HMRC should never be ignored. If you ignore HMRC’s letter, then it will likely commence a criminal investigation into your tax affairs.

What is Code of Practice 9 (COP9)?

Code of Practice 9 is the official name of the procedure that HMRC uses to offer the Contract Disclosure Facility.

The terms ‘CDF’, ‘Contract Disclosure Facility’, ‘COP9’ and ‘Code of practice 9’ are often used interchangeably.

HMRC publishes a COP9/CDF help booklet that can be found by clicking here. As you can see, HMRC itself recommends using an advisor when entering into COP9.

60 Days – An Important Deadline

The 60-day deadline is strict and is the only firm deadline applicable to the COP9 process.

From the date of receiving the HMRC Contract Disclosure Facility offer letter you will have 60 days to take action. You need to either return the rejection notice (if you believe you have done nothing wrong) or acceptance notice along with the outline disclosure documents. HMRC will then write to you in due course confirming your decision.

What Do I Need To Tell HMRC? What If I Don’t Disclosure Everything?

The offer of immunity from criminal prosecution only applies to irregularities identified in the outline disclosure. HMRC reserves the right to undertake a criminal investigation in respect of anything undeclared in the outline disclosure itself. Therefore, it’s extremely important that the COP9 outline disclosure contains details of all deliberate and non-deliberate inaccuracies.

How Much Detail Should I Go Into?

It’s more important that all irregularities are at least identified in the outline disclosure than it is to go into significant detail. Your advisor should walk you through the documents and advise on the level of detail that needs to be included. However, your outline disclosure documents should not be deliberately vague. This could result in increased penalties when HMRC come to assess your overall liability – see ‘telling, helping and giving’.

Submitting the HMRC Contract Disclosure Facility Outline Disclosure – What Happens Next?

Once the outline disclosure documents have been submitted, HMRC will then confirm receipt. Approximately 3 to 6 weeks later HMRC will then confirm that it will not be proceeding with a criminal investigation in respect of anything contained within the outline disclosure – assuming the documents were completed correctly. Should HMRC feel that it has additional information, not in the outline disclosure, then the acceptance letter will state this.

At this point immunity from criminal prosecution regarding your tax affairs is in place. Your advisor should now focus on working with you to submit the ‘full disclosure’.

Moving Forwards

If you have any questions regarding the outline disclosure of CDF/COP9 process in general, then please don’t hesitate to contact us using the ‘Contact Us’ link on our website – www.tmsterling.co.uk

HMRC Compliance Checks – A Brief Overview

HMRC Compliance Checks

What are HMRC Compliance Checks?

HMRC compliance checks are used by HMRC when looking into a someones tax affairs. Just because a person Is the subject of a compliance check it doesn’t necessarily mean that they have done anything wrong. It might be that HMRC are simply checking for errors. However, this shouldn’t eliminate the concern of being the subject of  HMRC compliance checks.

HMRC’s has considerable resources and focuses in achieving the highest return on their investment. The taxpayer should be mindful that they have fallen under a ‘higher risk’ category.

New Software Used For HMRC Compliance Checks

Due to technological advances in recent years, HMRC now possesses a highly sophisticated electronic selection software. This software is geared towards identifying taxpayers whom have tax irregularities.  The old system relies on a HMRC tax inspector to gather data – this has gone. HMRC now has a dedicated section for this purpose. This is knows as the Risk and Intelligence Service.

Why has HMRC Chosen Me?

HMRC’s powers of ‘Catching’ taxpayers are well documented. What is less well known is the general approach that HMRC uses in its selection parameters. HMRC is keen to conceal specific details regarding what they look for in order to avoid people adapting to their systems. Despite this, we do know that there is degree of ‘risk profiling’ involved in HMRC compliance checks.

‘Behavioural risk’ is one factor to consider. For example, if a person continuously discloses the use of tax avoidance schemes they will be put into a higher risk category. This applies even if the scheme is ‘DOTAS’ registered. A simpler example is a taxpayer who is regular in submitting their tax returns late. this a simple mistake which can lead to a person becoming subject to a HMRC compliance check.

One thing is certain. HMRC now takes into account a much wider range of information from a much wider variety of sources. This helps to strengthen its decision to perform a HMRC compliance check.

Have you the subject of a HMRC compliance check? Do you have concerns regarding one? It’s important to seek advice from a professional advisor as soon as possible. An advisor will be able to provide help in dealing with a check should one arise, and even how to help avoid one in the first place.

COP9 (Code of Practice 9): Everything You Need To Know

COP9Code of Practice 9

If you need to make a disclosure regarding your taxes or have been prompted to do so then it’s likely to be under of Code of Practice 9. Although COP9 can sound complicated, it needn’t be, and has one valuable benefit.

What is COP9? Does COP9 have any advantages?

It’s important to note that a COP9 investigation is one of the most serious types of investigation. A Code of Practice 9 case is only one step down from full criminal investigation. Therefore, it’s important to appoint a COP9 professional to aid you in the COP9 process as soon as possible. However, a COP9 investigation can offer a distinct advantage to the taxpayer involved.

An investigation carried out under COP9 offers the taxpayer suspected of fraud immunity from criminal prosecution. In return, HMRC expects a full and honest disclosure regarding their tax affairs. The investigation can be initiated by either HMRC or the taxpayer themselves.

If HMRC suspect someone of serious tax fraud then will issue the taxpayer with Code of Practice 9 notice. The taxpayer will then have 60 days, in which time they are either required to deny the allegations and therefore the offer of protection from prosecution, or admit to carrying out of tax fraud and complete the ‘outline disclosure’ – outlining their activities in general terms.

If you wish to make a disclosure regarding tax fraud, whilst being protected from criminal prosecution, then this can be done by applying to HMRC to make a disclosure under the ‘CDF’ (contacted disclosure facility). Again, you will then have 60 days to either accept or decline the contract once issued. This should not be undertaken without the guidance of a professional.

How long will a COP9 investigation/disclosure take?

Due to the individual and complex nature of Code of Practice 9 cases, this is almost impossible to answer. Some cases can take several months, some several years.

However, instructing a professional can not only help reduce the time required to complete the process but can also reduce the amount of stress and work required on the tax-payer’s behalf. For example, we undertake all dealings with HMRC and compile the final report on our client’s behalf. This means that our clients simply need to provide the required information and ‘adopt’ the report once completed.

What will happen if I refuse the offer of  a Code of Practice 9 disclosure?

Refusing HMRC’s offer to make a disclosure under COP9 can have extremely serious consequences. If you refuse the CDF (contractual disclosure facility) and HMRC subsequently uncover activity that is considered ‘serious tax fraud’ then they may pursue a criminal prosecution – potentially resulting in imprisonment.

No attempt should ever be made to deliberately conceal information regarding unpaid tax liabilities.

If you have any questions regarding your own tax affairs, believe that you may wish to make a COP9 disclosure or have received a COP9 letter from HMRC, please contact us for further advice.

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