An ex - client is taking legal action on a contractual dispute. He wants me to repay the fees charged. Some of the fees were in connection with my advise regarding a tax treaty non residence position. I am happy that my advice was correct as it was connected with the effective place of management and control for the period that I was dealing with, i.e. 2013 and 2014 accounts and tax returns
Significant to the case is that HMRC treated the company as treaty non resident for the 2013 and 2014 years. On request from the client for information that he provided to HMRC which lead them to believe that this was the case, I have received a letter from client to HMRC, dated July 2015 which states that the company is controlled outside UK. This letter makes no mention of the place of control prior to 2015, which may have been different.
There are two possible scenarios:
1 The client also wrote addressing the position in 2013 and 2014 informing HMRC that the company was controlled outside UK in those years ( but failed to produce that letter to me as part of my court defence papers). In this case this would contradict written information I have on my file. There is no dispute that the company did not operate in the UK at any point and so other forms of tax relief ( double tax ) could apply which means that there is no tax lost to HMRC.
2 HMRC have made an error and treated the July 2015 letter as relating to 2013 and 2014 ( although this is not what the letter said )
My advise , and the time charged which is disputed, centred around the fact that the company appeared to be controlled from the UK and the treaty non residence approach would therefore not be applicable. I put forward alternative suggestions to ensure that the company was compliant with tax law and also did not suffer UK tax.
Central to the clients case is that HMRC treated the company as treaty non-resident but the information I have indicates that they were not correct to do so.
Can I write to HMRC laying out the facts and stating the evidence I have which indicates that they were incorrect to reach a conclusion that the company was treaty non-resident. Would sharing the information I have breach data protection and confidentiality rules, bearing in mind that I am no longer engaged as their accountant ?
Anybody got any ideas on how I can get HMRC to revisit this point to see if the company really is treaty non resident?
When I took the client on there were significant fines imposed for non submission of CT600. When they made thier decision, they removed these fines, so there is some benefit to the tax payer from the HMRC error.
In addition, the company paid for director's travel from Germany to UK ( part of the evidence that he was controlling the company from the UK ). If the client argues non UK control to get treaty non residence status, the flights etc would be private. This would then be an overdrawn loan account and as I doubt this has been cleared, possibly a loan charge?
I accept that HMRC would not respond directly to me as they would have no authority, but I would be able to ask the client to confirm via the court process if HMRC had changed their position on this issue