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Not a response a taxpayer wishes to ever hear from their agent, especially when it is not correct. Taxpayers sometimes get themselves into serious tax problems from what start out as the best of intentions.

The bank won’t lend, the business needs to invest, where to turn?  “Borrow” inappropriately from the VAT man?

Not a wise move but not one that isn’t irredeemable with positive, proactive action.

 

I need the cash

The bank wouldn’t advance funds for capital investment, other banks were not interested so the taxpayer resorted to “borrowing” from the VAT man to fund the capex. Just one VAT return was “adjusted” to trigger and enhanced refund. The “free” money became addictive and when further finance was required, the bank of HMRC was dipped into again and again.

Always an intention to repay, but the repayment day kept getting deferred. Then the brown envelope arrived querying a particularly large, and inflated, refund.

In HMRC’s eyes the action amounted to tax fraud, an action capable of prosecution and potentially gaol.

 

Don’t panic

The HMRC challenge panicked the taxpayer which was exacerbated by being advised he was “Going to gaol”.

We were introduced to the taxpayer and assured him that whilst he had a big tax problem to address, he would not go to gaol if he took and followed experienced advice.

Following an initial evaluation of the tax problems, a Contractual Disclosure Facility (CDF) CoP9 was sought for the taxpayer to address his problems with HMRC. The Contractual Disclosure Facility gave the taxpayer surety that he would not be prosecuted for the matters he disclosed to HMRC.

The voluntary disclosure of all relevant tax issues arising from “borrowing” from the VAT man encompassed VAT, income tax, capital allowances and in some years, trade losses. Carefully managed, the CDF gave the taxpayer time to reconcile his position with HMRC.  It helped preserve his business and allowed him to focus on growing his business to fund the tax settlement.

 

The cost

The financial cost of reaching a settlement with HMRC was not as great as the taxpayer had thought. He was always aware he needed to repay the “borrowed” VAT so had mentally budgeted for this, the other taxes that he expected were minimal due to the use of claims and elections he had not considered in his panicked state.

The penalty cost was kept to a minimum, largely as a result of the pro-active action of disclosure.  HMRC also confirmed the taxpayer would not be named and shamed for his actions.

The business survived and the real concern of being prosecuted never materialised.

 

From the ashes of disaster

Allowing the taxpayer to focus on his business resulted in the taxpayer being able to fund the HMRC liability much sooner than he originally anticipated. Removal of the worry about HMRC ultimately resulted in the taxpayer securing a multi-year guaranteed supply contract with one of the national high street supermarkets.

The result being the taxpayer was able to more than double the size of his business and have a cleared tax history.

The irony being banks were falling over themselves to loan the taxpayer funds as our instruction concluded.

 

A magic wand

We don’t possess a magic wand, no agent does. But from what may seem a dire and bleak position can emerge peace and blossoming success.

With skilled and experienced assistance, gaol can be avoided, the taxation issues can be managed and life can not only be returned to normal, it can on occasions be substantially better.

Whilst we don’t possess a wand sometimes we can find a bit of fairy dust!

We have a wealth of experience dealing with serious tax problems, whatever their origin.
Get in touch with Andy for help and advice.

If you cannot find the information you need on our website, please contact Andy Maxfield using our contact form or email directly to amaxfield@hwca.com

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B16 8SP

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WC1X 8TA

Our addresses

Birmingham

Sterling House
71 Francis Road
Edgbaston
Birmingham
B16 8SP

Tel: 0121 456 1613

Leeds

Sterling House
1 Sheepscar Court
Meanwood Road
Leeds
LS7 2BB

Tel: 0113 3981100

London

New Derwent House
69 – 73 Theobalds Road
London
WC1X 8TA

Tel: 0207 025 4650