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Newth talks tax - Enquiry and very ill client

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27th Jul 2009
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Clive Griffiths disclosed that his firm was in the early stages of a fairly serious non-disclosure case, in his query dated 28 February 2008 (see 180108). The case was already progressing, and there were many unidentified bank lodgements amounting to £375,000 in the period of six years up to 2006/2007. Clive later amended this to £656,000.

The client had not retained bank paying in slips. HMRC had initiated the enquiry on the back of an offshore disclosure in the previous year. That itself was subsequent to a section 29 disclosure case involving undeclared chargeable events, where large figures were involved.

The client was 70 years of age and quite unwell. His GP had written a lengthy letter to Clive’s firm and HMRC advising the inspector of the extreme level of stress the client was under, and also emphasising his concern at the prospect of the client’s health actually deteriorating because of the enquiry.

This was the first time that Clive had actually encountered such a situation. He was also very concerned that the case would only create further stress for an already unwell man, whose wife had undergone serious operations in recent years.

Clive asked for comments from people who had experience of such cases, and how to alleviate the client’s anxiety. The GP’s letter had made reference to the client suggesting that he would bring the case to an end by extreme means.

Simon Sweetman suggested that Clive should try and deal with the case as quickly as possible. Often there was a fear of things that would not happen, such as prison and extreme penalties.

Clive then disclosed that, as the case progressed, his client showed a strong element of self-preservation. He had been a successful businessman and had accumulated a considerable degree of wealth. He had dealt with all money matters personally, and now felt that he had let his wife down. There will undoubtedly be a profound impact on the marriage relationship because of the case, and this had contributed to his current deterioration of health.

The two tax inspectors who had met with Clive at his office had suggested that they would be in touch within a couple of days, but this had not happened. Delays were contributing to the client’s ill-health. He was not expecting sympathy, and admitted that he had acted foolishly and let down his wife and two daughters. He was not expecting nay favours from HMRC, but the GP’s letter was very dramatic.

Simon Sweetman later observed that Clive should contact the inspectors by telephone and ask them to deal with the case as a matter of urgency. It may be that the delay was because the case had been passed to SCI. Simon queried whether the client had actually admitted to his wife that he was being investigated. Clive replied in the affirmative, and that the wife was currently very poorly. The only good thing to emerge was that the client now accepted full responsibility for everything that he had done.

Obviously any UK citizen is under an obligation to pay their due amount of taxes, irrespective of their health. However, this case illustrates the stress that any investigation or enquiry causes the client, and possibly also the tax adviser. I applaud those who deal with investigations all the time.

HMRC investigators may be very nice people away from the office, but one wants to avoid them at all costs in the business world. They are highly trained, motivated and intent on obtaining as much money as possible for HM Treasury. One of the reasons for taking out professional expenses insurance is to avoid personal contact with them as much as possible and the accompanying stress if an enquiry should take place.

Let’s not be coy about this case. Clearly the client has admitted to his doctor an intention to commit suicide. This is not unique, and I recall a case concerning a modest trader about ten years where this actually took place, and where the taxpayer’s fears were unfounded.

This puts Clive and the HMRC investigators in a difficult position. I would take the advice of my old friend Peter Clare (Mr Tax of Leicester) who advised that a settlement figure should be offered to HMRC as early as possible in any investigation. Whether this would work under current legislation and practice remains to be seen. ‘Clive why don’t you assess a reasonable settlement figure, inclusive of interest and penalties, and within the client’s means and offer it to HMRC as soon as possible?’ The HMRC investigators should be made aware of the reasons, and they can only say ‘no’. Obtaining funds from a living client would undoubtedly be easier than perpetuating an investigation if the client died and left a seriously ill widow. An early settlement would benefit all parties.
 

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By Trevor Scott
28th Jul 2009 16:34

Closure
I would be concerned about informing HMRC that the client is ill and wants the enquiry over with quickly, in effect it informs HMRC that they are likely to find it easier to get approval for a higher assessment ... even one with a dodgy basis.

Still, if you have informed them of such and made an admission of errors, offered a settlement, offered information and help to further the enquiry, and then even after a doctor’s letter there is no real movement there is obviously the basis for a letter to the regional head in order to ask for closure ... or the facts will be taken to the Tax Tribunal to obtain closure.

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By User deleted
28th Jul 2009 19:46

Difficult
Many many years ago when I trained in Revenue in an talk from then enquiry branch we were told that inspectors there expected 2 suicides a year from their caseload.

Whilst some consideration is needed of the health aspects this is not a speculative fishing exercise but the case of a man who has deliberately avoided his responsibilities. Sometimes people react to that situation in an extreme way. I am not sure that this should deflect HMRC from pursuing them. I wonder if the doctor concerned has thought about what the NHS could do with that amount of money. He might have a point if HMRC were proposing a criminal prosecution but not otherwise.

A tough call for the adviser but I agree with above that maybe disclosing to HMRC at early stage not best policy.

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