Private Expenditure and The Importance of Keeping Records

A recent tribunal case (D White v HMRC) again highlighted the importance of keeping accurate records for tax purposes, this time in a case involving private expenditure on a company credit card.

The Director used the card for both business and private expenditure, but there were no accurate records to enable them to determine the amount of private expenditure.  HMRC therefore argued that the Director’s loan account was incorrect and raised assessments under the rules on cash equivalent of benefits treated as earnings.

The taxpayer appealed against the assessments but had no evidence to show that the HMRC figures were incorrect.  There was nothing to show that private expenditure had been reimbursed, or that the director’s loan account had been suitable adjusted.

The tribunal had no choice but to dismiss the appeal.  This shows the importance of keeping accurate records as, once HMRC have raised an assessment, it is generally up to the taxpayer to prove that they are not correct.  This can be difficult if the records are not sufficient to do so.

Tax, Morality, and a Load of Balls!

I am a Tax Practitioner.  As a Chartered Accountant and former Inspector of Taxes, I have always been taught [and sought] to act ethically.

Unfortunately, I fear HMRC is at grave risk of becoming dysfunctional.  Too many cuts in expertise, perhaps?  Too many silly projects, instead of performing good service.  Generally a political problem, rather than the good Civil Servants trying to keep the ship afloat?  Questions!

From my experience, I understand that certain people have tried to disclose undeclared income to HMRC, but have then been ignored.  Understandably, this makes them a little reticent in sending a reminder!

I have just had a telephone call from a pensioner [not a client] who is [from information provided] not due to pay tax, but is having tax deducted at source from her widow’s pension.  A decent HMRC would provide her with a real person to talk matters through.  However, such local Help Desks have been abolished.  This seems to be on the grounds that you can get such assistance “online”.  There are [many] people who have never been online, and do not own computers.

Please do not suggest a telephone ‘Help Line’ is remotely equivalent – even if you have the patience to wait the extraordinary length of time for the telephone to be answered.

You may speculate where such saving in Government costs may fall, in terms of rich and poor.  In this particular case it is likely to fall upon the pensioner who cannot understand how to get her [deserved] repayment.

In our great democracy such matters may affect your vote?

Surely, a sensible and coherent Tax Policy should be a great vote winner?

With such an opportunity, then, you may speculate as to why Ed Balls decided to attack giving cash to humble workers, rather than focussing on the more complex area of multinational business [where the money is]?

Using straightforward cash?  We all realise, [surely] electronic monetary transfers would be far better than cash?  Electronic transfers would involve Banks that would impose charges on the small business concerned.  If the business was in overdraft, the Banks may take away control of day to day funds and then, at their whim may close the branch in the [it does not matter because it is out in the sticks] small town where the humble worker may reside?  Transfers to banks that may be computer hacked for millions?  Run “Trust Me I am a Banker” past your marketing department as a slogan?

The Westminster People know the Bankers, so obviously they understand how trustworthy they are.

The argument seems to be give your money to the big banks and supermarkets, because they are obviously less corrupt than the nice woman who cleans your windows and has done since she inherited the business from her father, when she decided to look after him after his stroke?

Tax is a social good.  It should be paid according to the law.  Please do not bring morality into it, because if we thought that way no one would wish to pay it, because in the diverse economy of modern society there will surely be something everyone could claim a moral objection to funding.

If paying tax is a moral duty, then presumably any radicalised Muslims have a good argument for tax exemption, because they would object to bombing the Islamic State?

As to Evil Tax Planning, I would suggest that anyone who is not planning on [at least] smoking 20 cigarettes and also drinking a bottle of wine this evening is guilty of planning to avoid, VAT, tobacco and alcohol duty.  I trust you will wake up appropriately ashamed of yourselves!

HMRC Announces Further Avoidance Powers Consultation – ‘Strengthening Sanctions for Tax Avoidance’

HMRC has published a further consultation setting out proposals to attempt to punish taxpayers who use a series of tax avoidance schemes, so called “serial use”.

The plans propose a surcharge for those who repeatedly use failed avoidance schemes as well as further reporting requirements on such users.

It is also proposed that there could be a specific GAAR-related penalty (general anti-abuse rule), together with plans to publish the names of serial tax avoiders repeatedly using tax schemes that fail.

In addition the government also wish to implement further rules including a change to the thresholds at which the POTAS rules (promoters of tax avoidance schemes) kick in.

The government and HMRC have already produced a number of new rules and sanctions for users of avoidance schemes, and it remains to be seen how effective they have been.  Changes already implemented include the introduction of: the general anti-abuse rule (the GAAR), accelerated payment notices (APNs) and follower notices, as well as the expanded DOTAS regulations and the new promoters of tax avoidance schemes (POTAS) regime.

We have argued before that HMRC should have sufficient powers already so it interesting that they now feel the need to implement new rules, before the changes that have already been implemented have had time to settle in.  We’d be interested to hear your thoughts on the extensive powers that HMRC now have, and when we might say, “enough is enough”.