Make Sure HMRC Notices are Valid! – Technicalities and Human Rights Law

Recent cases have emphasised the importance of that European Human rights laws have on the UK tax system; however the cases and our own recent experiences suggest that HMRC do not take these implications seriously.

The recent Tribunal case of PML Accounting Ltd v HMRC [2015] considered a number of issues, including one relating to Human Rights.  The case involved an HMRC Notice requiring information from PML Accounting and the firm’s appeal against a penalty for failing to provide the information on time.

The Tribunal found that the information notice had not been complied with and that the taxpayer did not have a reasonable excuse for the failure.  However, they also determined that the Notice was invalid as it had been issued under the wrong piece of legislation.

The notice was issued under FA 2008 Sch 36, para 1 as part of a review of the company’s position under the Managed Service Company Legislation.

The Tribunal determined that there had been suggestion that any investigation under the MSC legislation would lead to a charge on PML.  As a result, the information notice should have been issued under paragraph 2 (third-party notices) instead of paragraph 1.

The Tribunal also concluded that the Notice breached the human rights of PML’s clients as it had been issued under the wrong paragraph.  A paragraph 2 notice relating to third-parties provides a level of protection for the taxpayers involved as they may not be issued without either the taxpayer’s prior consent or the tribunal’s approval.

There have also been a number of other cases highlighting the inadequacy of HMRC’s approach to human rights law.  For example, in Bluu Solutions Ltd v RCC [2015], the Tribunal confirmed that a tax penalty, which is meant to be punitive and to deter, is “criminal” for the purposes of Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms.  This provides taxpayers subject to HMRC penalties with additional protection stating that taxpayers have the right to a fair trial and requires that the taxpayer is presumed innocent, with the burden of proof on HMRC.  Also proceedings have to be brought within a reasonable time, and the taxpayer must have enough resources and time to defend against the penalty.

Further protection is provided by Article 7 which requires that any penalty should have a clear basis in law and therefore where there is genuine uncertainty as to the underlying tax law, it could potentially be a breach of Article 7 to impose penalties based on non-payment.

These points all provide extra protection that advisors should bear in mind when assisting clients faced with HMRC investigations.  If you have any concerns over HMRC’s approach then please contact us and we will be delighted to assist.

The Season of Goodwill is (hopefully) not ended forever, but certainly the Tax Season is Upon Us – “Joseph also went up from Galilee…into Bethlehem to be taxed with Mary his espoused wife, being great with child” (Luke 2:4-7)

As the above quotation shows, paying taxes is nothing new.  As we approach the end of January and the deadline for filing and pay tax for the 2014/15 tax year we write to remind you that Eaves and Co are here to help.

Whether you are an individual struggling to understand your tax return form, or have not registered for HMRC’s Online Services in time, or an accountant needing extra assistance with a complex tax issue, we can help and hopefully ensure you are able to file before the 31 January deadline.   We have specialist extensive professional experience and expertise to deal with those knotty technical problems, plus relevant software and access to HMRC Online filing, so can file returns online at short notice.  All this with friendly service!

On another topic, and as a reminder for clients who are having difficulty raising finance, you may recall from previous messages that we have a contact who is involved in raising finance for all sorts of different purposes. Whatever weird and wonderful schemes your clients wish to consider – talk to Jonathan Smith on (Tel: 07778 523499) or (email jgsmith@jgsfinance.co.uk).  Quote reference ‘EVL’.  His website is www.jgsfinance.co.uk/asset-leasing-contract-hire-sale-leaseback.  This includes arranging loans to pay unpleasant tax bills.

As a reminder, Jonathan Smith qualified as a Chartered Accountant with Arthur Andersen but now works solely in raising finance. He is a man I have worked with over many years, and as a former partner of mine, a man who I trust and can recommend highly.

Offshore Update – HMRC Clamp Down and Starbucks EU Tax Case

HMRC have recently purchased advertising pointing out that offshore income and gains may be taxable in the UK. This is true. In general, for UK domiciled residents, all worldwide income and gains are taxable (even where you reinvested the proceeds and did not remit them to the UK). For non-residents, UK source income may be taxable.

This is where it gets complicated (as if it was not before!). Like many other matters in the international tax world, circumstances can alter cases . Domicile, double tax treaties and all the new statutory residence test may all have an impact.

If you have offshore assets, review them now, before HMRC really clamp down next tax year. If in doubt, seek tax expert advice.

In an interesting twist to the European Question, the EU authorities have just issued a decision on the advance tax ruling given to Starbucks by the Dutch Revenue, helping Starbucks avoid tax in other jurisdictions. This was done by Starbucks having higher tax deductible costs with a lower tax rate in the Netherlands, thus meaning there was only immaterial profit in countries such as the UK, so minimal UK corporation tax. The EU Authorities feel this amounted to illegal State Aid, such that Starbucks should be enforced to repay it in full.

The political question is whether this is:

a) A good example to tax abuse by multinational corporations?

b) An unacceptable interference in Dutch sovereignty because tax is not supposed to be controlled at EU level?

Is that the smell of coffee or the protagonists’ lawyer preparing their morning shot of napalm?