Hi Everyone,
I hope you're having a good weekend.
I've recently brought on a client who is a builder and he hasn't filed a tax return for the last 7 years despite being required to do so, HMRC are claiming that he owes them over £9k in penalties and interest.
I've written to HMRC explaining that as my client was on a CIS deduction scheme of 20% and he worked solely for contractors and not the public everything he would have earnt would have been taxed and it is very likely that after factoring in other expenses and his personal allowances he would have been due a large rebate at the end of each year.
After following up on the letter and speaking to them they say that the the only way forward is if we produce the last 7 years worth of accounts and file the outstanding returns.
My client clearly cannot afford to repay the £9k+ as he is a builder with a family to feed and I can't image that any court would award a settlement to HMRC that would cause undue hardship to his family. Producing 7 years worth of accounts and tax returns isnt an option either because of the costs involved. My client is happy to drop his claim to any rebates if HMRC will leave him alone and he can get a fresh start going forward.
I understand that many of you may ask why I have taken on this client in the first place and that is because I believe that he is being aggressively victimised by our tax authorities for commiting no crime other than to work in order to feed and house his family, he just isnt capable of understanding the tax system without the help of an accountant.
My approach to this will be to write to HMRC stating our intent to take this to tribunal if they don't drop the penalties and if that doesnt work then file the application for the tribunal process and have the case heard, my client is in agreement.
I would be grateful if anyone could advise on a better course of action and what they believe the chances are of success in this scenario if we do take this to a tier 1 tribunal?
Replies (12)
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Best course of action
Prepare the outstanding returns. The large rebate due for each year will go some way to mitigating the costs. Chance of success at Tribunal? I'd say less than 30%.
Little chance of success
It may be that I am not as brave as you (or foolish, as the result may prove), but going to tribunal with no facts or figures to back up your argument seems pretty risky, to me.
It is unlikely you will charge your client a worthwhile fee for such a risky venture, so if you are feeling altruistic, why don't you give him a hefty discount for preparation of accounts/tax and that way you will be going to tribunal on a surer footing. Indeed, if you take this route then a tribunal may not be needed in the first place.
Persuasive evidence would need to be produced to the Tribunal to stand any chance of success.
Will not any tax refund pay for the relevant fees?
OP sounds as if he wishes to make a 'complaint' to the tribunal rather than an appeal which is made against the decision of HMRC within the time limit! I would agree with BKD that the OP should prepare the tax computation for all these years and show that there is no 'potential lost revenue', and then try to argue the case with HMRC from thereon.
Tribunal
Shamrock ignore the no alls on here that think they can knock a fellow professional we have all been on the receiving end of them.
HMRC will not budge on the tax returns. I have done a lot of these cases of over the last few years and a tribunal will not help you either.
Work out quickly what the likely tax position could be. Has the client considered bankrupcy?
Most times HMRC will only process the returns and you will have no come back.
PM if you want a chat in private
Good luck