Case Studies In this case an elderly pensioner had deferred receipt of their state pension which created an entitlement to a lump sum. This sum was to be taxed at the 'prevailing' rate at the time of payment. The prevailing rate was calculated as zero in the year of payment and so no tax was deducted from the lump sum. Two years later the client received an SA statement of account showing a sum just under £10,000 due in tax on the lump sum. When challenged HMRC argued that because the client was a "taxpayer in the year" then tax was due. This led us to discover that HMRC had wrongly computed the liability (excluding the lump sum) for the year in question and that the client only paid any tax because incorrect tax codes were issued to the private pension providers. , We also experienced long delays in HMRC responding to the points raised but they continued to harass the pensioner for the sum they alleged was outstanding. We formally complained about the delays, errors and unfair treatment of our elderly client. To be fair to HMRC, once a more seasoned officer became involved, matters were quickly and amicably concluded. HMRC agreed that the tax on the lump sum was not due and they further agreed that our client had overpaid tax in the year in question and in subsequent years. Instead of having to pay a large sum in tax the net result was a repayment to our client and a further amount received from HMRC as a gesture to acknowledge the unnecessary worry they had caused the client. By Pension Tax Woes In this case we were presented with a situation where HMRC were vigorously pursuing 'self-assessment' debts for a number of years. It became clear that the client had been the subject of a review of his significant travel costs claimed in his return and that HMRC had 'determined' he could not claim them and issued a number of assessments as a result. Because he feared what would happen if he continued to claim the costs the client stopped claiming them in his ongoing returns. His existing advisers at the time did not manage the situation too well and left the client to the mercy of HMRC. , We reviewed the facts and managed to get HMRC to agree to look again at the matter. Following a proper review of the facts and evidence HMRC were forced to agree that the travelling costs were allowable after all. This resulted in the old debts being quashed and a claim to tax relief for the travel costs that were not included in more recent returns due to HMRC's wrongful insistence that such a claim was not allowed. By Employment travel costs won
The taxpayers in this case were directors of a company that liquidated in October 2010 with unpaid PAYE liabilities. HMRC made determinations under Income Tax (PAYE) Regulations 2003
(SI2003/2682) reg 72, shifting responsibility for the tax to the
taxpayers. HMRC claimed the employer wilfully failed to deduct the
right amount of tax from the PAYE payments and that the employees
received the relevant payments and were aware the tax was not paid.
The Revenue noted the company chose to change its payment method
from mainly dividends to mainly salaries and accused the business of
making the decision in the knowledge it knew it was about to run into financial
We interjected and on behalf of our clients we appealed. We asserted that the payroll had been by an
independent third party for many years without problems and that the decision to
change the method of payment was to spread the tax due over the year,
rather than have to pay a large bill each January. The only reason the
PAYE was not paid on the salaries was due to a sudden cash flow
The First-tier Tribunal did not accept HMRC’s contention that the way
the directors chose to pay themselves had been dictated by possible
financial problems on the horizon, finding the decision had been taken well beforehand. The fact that there was unpaid PAYE after the liquidation did not “in itself mean that the PAYE was not ‘deducted’”. PAYE records were details of deductions but did not constitute
deductions. The salaries in this instance were set before the start of
the tax year, meaning there was a pre-existing entitlement to the sums.
The salaries were processed by the payroll agent using third party
software and by maintaining P11 working sheets and monthly payslips. The
taxpayers’ pay was credited to a director’s loan account and amounts
were drawn, with differences settled at the end of the year. The tribunal was satisfied there had been no wilful non-payment of PAYE, and allowed the taxpayers’ appeal was allowed.
Our intervention and appreciation of the facts and how to present this to the Tribunal saved our clients a great deal of money and put an end to their long standing ordeal. Full details of the case can be found on the
Tribunal Service website.
By Income Tax Regulation 72, Tribunal victory in Prowse v HMRC (TC3617) In an unusual case Rooney Tax Services represented a former wife in a dispute with HMRC that also involved her former husband and business partner., After a matrimonial break up several years before our client was most surprised to receive a number of assessments from HMRC taxing her on her share of partnership profits from the business that she, and her former husband, used to run together but had not done so for quite some while since they separated and he ran it on his own. It transpired that the husband and his advisers had submitted accounts and returns to indicate that our client was still receiving a share of profit thus halving the husbands liability by, rather unceremoniously, moving it to his former wife. HMRC were more than content to raise assessments on both parties and await the outcome. After a thorough examination of the facts and evidence a 'pre-trial' hearing was held to determine whether or not, as a matter of fact, a partnership still existed in this matter in the relevant years of assessment. The Tax Tribunal upheld the appeal presented by Gary Rooney in Wathi & Banghar v HMRC TC/2009/15614 and
TC/2010/01960 where it was argued, on behalf of the Ms Wathi that from a date in April 1998 she
took no part in the management and control of the business, received no
income from the business and was not entitled to a share of profit.
He further suggested that paragraphs 1 and 2 of the
Partnership Act 1890 required one or more persons to be acting in common
with a view to profit for a partnership to exist and the mere retention of
an interest in the building in which the business was carried on was
insufficient to confer a partnership status. The Tribunal agreed and the former husbands attempt to unfairly share his tax burden with is ex-wife failed. By Partnership Tax dispute - Tax Tribunal win
We took over a long standing investigation case being run at a local level.
HMRC were seeking well over £500K and the matter was heading for Tribunal.
We investigated matters and, despite fierce resistance from HMRC, sucessfully reduced any claim by HMRC to a fraction of their original position. We also pointed out numerous failures in HMRC's workings and approaches.
Following the closure of this investigation we are now advising the client in making a formal complaint to the Adjudicator's Office
By Massive HMRC claims reduced
We were contacted by someone who had disposed of two properties in quick succession several years earlier.
There was some confusion about dates of occupation and so HMRC alleged that the proceeds of one of the disposals should be treated as a Capital Gain.
We thoroughly investigated the matter and presented the facts, evidence and our view to HMRC in one letter. HMRC agreed the position immediately and the matter was closed.
By One Letter Solution
We were assisting the Testimonial Committee of a very prominent Rugby Player. HMRC were being somewhat aggressive in checking the liabilities of the Committee and were taking an extraordinarily long time to move matters along.
To force the issue we applied to the First Tier Tax Tribunal for a 'closure notice'. This was resisted by HMRC who wanted to continue making enquiries as before.
We presented matters to the Tribunal Judge who agreed with us: the Revenue had been afforded every co-operation and been provided with all necessary information but their intransigence was a breach of our clients right to a fair resolution within a reasonable time. HMRC were ordered to conclude their enquiries within just a few weeks.
The case was then promptly resolved when otherwise matters would have dragged on for many months (possibly years) to come.
By Tribunal Victory
We were contacted by a person who was being prosecuted for 'failure to notify'. HMRC alleged that their failure to notify chargeability to income tax over a sustained period was a fraud. We put the individual in touch with a team of experienced legal experts and went on to assist the legal team.
We established that no taxable profits had been derived from the activities in question and so there could be no offence of failing to notify chargeability. The case was dropped.
By Prosecution quashed
In two seperate cases we were asked to help a legal team to address the potential exposure to a confiscation order.
In both cases we were able to negotiate with HMRC's accountants and agree a significant adjustment on the amount on tax alleged to have been defrauded. In one case the amount was over six figures.
Whilst this had no impact on the prosecution for the offences it did reduce sentencing and the amnount to be paid by the defandants in question.
By Confiscation Orders reduced
We made a formal disclosure to HMRC related to some offshore assets. Some time later HMRC informed us that they wished to investigate the discosure, as they can do of course.
This gave us the opportunity to obtain more evidence (for which there was no time in making the earlier disclosure) which enabled us to reduce the tax due still further.
We obtained a refund for the client that more than covered our fee.
By Offshore Disclosures upheld