Recent tax case law has brought out some interesting points on how the Courts view operational issues.

1. Tax avoidance schemes associated with the film industry seem to follow inevitably (with various complications) from the complex tax reliefs which are designed to promote film finance. It seems to lead to a slightly odd dichotomy where the Chancellor sets law to give relief on film investment and is then surprised and upset when schemes are set up to exploit the reliefs. In Samarkand the tax avoidance scheme failed, partly because the Courts found emails which included phrases such as ‘Don’t mention this, it smells of pre-ordained’. This reinforced HMRC’s case that the scheme was not a straightforward use of the relief, but an artificial tax avoidance scheme, with no real commercial substance. A good rule of thumb would be to train staff not to put anything on file which they would be embarrassed to read out in court.

2. An interesting one in terms of postal submissions is the recent case of O’Keeffe. The taxpayer claimed his wife had posted his Return some weeks before the deadline. HMRC said they had not received it until a month after the deadline. They succeeded with their imposition of a late filing penalty.

Whilst the First Tier Tribunal agreed that mail may go astray, which could be a reasonable excuse, there was no proof of postage in this case. It would be interesting to hear what evidence HMRC put forward in terms of date of receipt, as mail does seem to go astray more often than it used to and with the closure of so many Post Offices obtaining routine proof of postage would be difficult for many.

3. Final procedural point – and statement of the obvious – encourage clients to keep proper records. The lack of a clear trail of what was owing led to the taxpayer in Michiels losing a bad debt relief claim against profit, because on balance the outstanding sums related to a later period.

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