HMRC Enquiry

HMRC Enquiry

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Client has been in business for many years as a CIS contractor with two employees working part time for him. 

Both employees have partners earning good salaries.

Cleint has been suffering health problems, and work has been slow.

HMRC has stated he has sufficient income to meet his personal expenses though not yet taken account of his partners

income.

The problem is that HMRC has said because of his ill health we believe employees worked more hours than declared

and are raising PAYE assessements on the contractor for two years.

If any addition was made to the contractors self assessment personal allowances and losses brought forward would mean no recovery

for HMRC.

I can understand the arguement that he has undeclared income, though as a CIS contractor this can be countered as he does not work for the general public

I need however to counter the assessment on employees which appears to be based on give the employees a full salary and seek the tax on it.

Any one else had this scenario ? and how did you dispute it?

Thanks 

Replies (4)

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By seawych
10th Oct 2014 12:59

What evidence do they have?

It's one thing to say that the employer's personal circumstances are such that he must have paid someone to do extra work for him.  But it's another to translate that opinion into an assessment that you can defend on appeal.

There has got to be more than mere assertion on their part if they have any hope of making the assessments stick.  Your client is entitled to know exactly what provable facts they have used to arrive at their conclusions.  That is facts, not mere opinions no matter how justified they may think their opinions are. 

Ask them for the evidence.

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By Shenkin
20th Oct 2014 12:54

Thank you for the advice Seawych

I have requested details of any evidence that they hold to support the assessments 

 

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By Roland195
20th Oct 2014 13:15

What does the payroll look like?

Is there a genuine looking payroll being run or is it the case that the part time employees fortuitously work less than the number of hours which multiplied by their hourly rate would require PAYE/NIC deductions (or even registration)?

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By seawych
23rd Dec 2014 22:56

A bit more about evidence

 

To make a PAYE/NICs liability stick, HMRC must contend that the subbies were paid from funds that are not reflected in the business records. 

That's assuming that there isn't a large amount paid out in "sundry expenses" or something similar that can't be documented. If so the only source for these alleged payments must be unrecorded sales.

So what exactly do they claim he's been doing?

 

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