Analysis of the latest Special Commissioners' decisions.
- Accounts for mortgage purposes
- Tax credits and investigations: Two bites at the cherry
- The end in store?
By Nichola Ross Martin
Accounts for mortgage purposes Trawling through recent Special Commissioners decisions I came across Harper (Gary) and the Director of Assets Recovery Agency SPC 507 [2005]. The case was brought by Mr Harper, appealing against what he considered to be excessive assessments made by the Director' under the Proceeds of Crime Act 2002. Two Special Commissioners considered whether the assessments made were excessive or not. Mr Harper was found to be in possession of a boat and a couple of houses, and his bank statements showed that there were many more lodgements than someone living on benefits might normally receive. In short he had much income and assets than he had previously declared to HMRC. He also failed to keep any books and records. He was however able to supply a set of audited accounts, prepared for mortgage purposes, which showed that there was a market trading business in existence, although its income too was never previously declared. It was left to the Recovery Agency to make some estimates. They did this by adding together bankings and assets purchased, less mortgages, plus The appellant challenged the treatment of the bankings as trading profits, because this lead to double counting. The Special Commissioners agreed with this in part, and only because for one of the years in question he had been ill. He had also sold his boat at this time, moved into a smaller house and his wife took over the business. They found it unlikely that income would have therefore risen in the period. This meant that they reduced the assessments in one year to nil, and reduced the following years slightly. Mr Harper was not professionally represented. The Recovery Agency's workings were made on quite a reasonable-ish basis, given that there were so few records to prove or disprove income. There did not seem to be asset and liability statements prepared. If you are estimating figures, particularly when there are so many year to assess you either do the job properly i.e produce a cashflow, profit and loss and balance sheet for each year, or else you can expect the Agency to do what they did in this case.
One would expect that accounts prepared for mortgage purposes would agree with the figures on a Self Assessment return, unless of course, no SA return has been submitted. In which case the accounts might be helpful in determining undeclared income.
- an amount based on the average family expenditure per the National Office of Statistics, plus
- income figures derived from the market trading accounts.
They then projected this calculated "income" over the eight years in question to work out the tax liability.