A fishy case goes bad
After untangling an HMRC investigation into a chip shop, Simon Sweetman worries that bad cases like this are becoming more common.
I have just advised on a a worrying HMRC enquiry because of the incoherence with which it was carried out. I do not suppose it to be typical, but it is nearer to typical than one would like.
The affair started as far as I was concerned when I was contacted by an accountant who was confused by the conduct of an enquiry because he was getting post from four or five different places in HMRC.
What had happened was that some three years before, HMRC had started an income tax enquiry into a client’s fish and chip shop, and the inspector had arranged to check the records, which was duly carried out at the agent’s premises. There was no meeting with the taxpayer, because the accountant was unwilling to hold one, and although the inspector made various remarks about the records – many of those remarks inaccurate because of an apparent lack of understanding – he seemed unable to reach a conclusion.
The next thing that happened – about a year into the enquiry – was a VAT visit and observation. When the accountant asked the inspector whether he had asked for this, he claimed to know nothing about it (which turned out not to be true). But what that meant was that now there seemed to be a two-pronged approach, except that it was hard to see where the two prongs came together.
The VAT side came up with some computations based apparently on a very short series of observations one Thursday lunchtime, and put out a demand for £85,000. It turned out that they were also relying on CCTV pictures from cameras owned by the local council.
The inspector came back to life at this point and raised assessments based on the VAT figures, suggesting an addition of £24,000 for the year under review. Although HMRC’s policy is to give one officer ownership of the case, this did not happen, so things became increasingly chaotic...