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Contact settlement re enquiry

I am in the process of concluding an enquiry with HMRC....

Figures for the tax understated have been suggested and I've negotiated them downwards.

My client does not accept the adjustments, but wishes to put the matter behind him and move forward. I have explained that there are week areas in the record keeping and he should therefore reach a settlement with HMRC based on the latest figures suggested.

The problem is that the inspector will not agree the amount of the penalty (or the interest, although I can estimate this) until my client has agreed the figures. Is he within his rights to so this. Being sceptical I think he'll now load the penalty to recover some of the tax he has lost in the negotiations!

Is my client now entitled to make an offer (a contact settlement?)

This is a CTSA enquiry.

Thank you for your help.

Rob
Rob

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By Anonymous
29th Jun 2007 15:57

Thank you all for your help so far....
Clive

There are discrepancies on the cash account and unsupported capital introduced. This has enabled the inspector to attack the GP%. I've looked at earlier years and the very poor record keeping existed the too.

There was also unsupported wages in respect of the year under enquiry. Although the inspector tried to apply this to earlier years I have managed to resist this.

Nigel

It is the percentage that I have tried to get the inspector to agree. I have indeed already spoken to him on the phone and he says he cannot agree the percentage until until my client agrees the tax due. If he agrees the percentage then of course I will know the actual amount of the penalty and the total amount my client will need to pay. I can then speak to my client and see whether he is going to settle at this figure or continue to fight his case (in which case he will need to improve the information being provided to us).

Trevor

Perhaps I should have said very weak area. See my response to Clive above.

Any further comments would be welcome.

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23rd Jun 2007 13:11

Perhaps I am just being stupid
but I cannot see how the Inspector can possibly agree the amount of the penalty without agreeing the culpable tax first.

He may however give you an indication of the % penalty that he believes the Board will accept if you have a chat with him on the telephone.

Clents never really accept that they have done anything that HMRC can collect extra tax on - that is just the way of it.

The best way forward is to agree the culpable tax first, at which point the inspector will usually tell you what he believes the Board will accept by way of penalty. You then write a detailed settlement letter of offer to him giving your breakdown of the penalty loading in the three categories which will usually be lower than his %.

The offer has to go up the line to be accepted and if your offer is not too far adrift from his, it will usually be accepted.

You are wasting your time trying to get everything agreed in advance and if your client does not like it - well I am afraid that is just tough: that's the way it works.

You will also have to accept that clients often change advisors after an enquiry - silly I know but it is probably something to do with them never really accepting that they have done anything wrong or that it is sometimes cheaper to pay HMRC to make them go away.

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23rd Jun 2007 18:48

Yes Trevor!
Agreed, that is why I have asked what the company's misdemeanours were. I would never accept the approach this inspector appears to be taking. I once adopted a "stand off" position on a case like this. The case was referred to a special " Appeals Unit" based well outside our area. The Appeals Inspector agreed a settlement £4500 lower than the inspector handling the case locally. He also said that he did not think the inspector involved in the case knew what she was doing!!! Basically the local inspector was over-ruled!!

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24th Jun 2007 13:14

What is the Culpable tax - If any?
That is the first question to be answered.

If there are just weak areas and the Inspector has not actually found anything then I entirely agree with Clive - call the Inspector's bluff, ask him to issue a determination, appeal against it and apply directly to the Clerk to the GCs to have it listed asap.

If the Inspector really has nothing, he will soon be slapped down by the Appeals Unit. or even his line manager.

If, on the other hand, the Inspector has got something, then you need to agree the Culpable Tax lost as a first step. Everything else flows from there.

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22nd Jun 2007 19:39

What are additions based on?
ISo the inspector attempting a trade off between tax additions and penalty? If so, it's not as unusual as you may think, though I hasten to add that sometimes inspector's are a little more discreet about it.

it would be good to know exactly what the company's misdemeanors have actually been, the nature of them and whether they are bedded consistently in the company's business records.

Are there weaknesses and errors consistently through the AP, or just in a few windows of the company's year? May be able to help with more background!

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