Dodgy looking GDPR provision tax refunds

Looks similar to this: https://www.accountingweb.co.uk/any-answers/interesting-ct-we-case

Didn't find your answer?

See:

https://www.citadelclaims.com/

https://www.thedpoa.com/services.htm

https://www.corporationtaxrebates.co.uk/service/

The CT refund is presumably automatic if you are within time to amend the accounts/CT600 (so the "no win no fee" deal appears misleading) and it's unlikely to work for the same reasons as the dodgy pension provision planning in the links below that failed on W&E grounds* and of course even if it does work in practice (due to lazy/incompetent HMRC) it’s really just a timing difference, as the provision will almost certainly reverse at some later stage (possibly at a higher 25% CT rate), so it basically relies on the “not being found out” rule and taxpayer ignorance.

https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j12280/TC...

https://www.accountingweb.co.uk/any-answers/interesting-ct-we-case

* an independent accounting expert would presumably value the provision at £nil, given the realistic risk in practice of a typical company with GDPR breaches being successfully sued (including settling in damages) for that.

 

Replies (30)

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By Paul Crowley
13th Jan 2022 10:04

Read the pension case in the last copy of taxation
I would consider this scheme so outright disingenuous that success would mean no company ever needs to pay tax ever again.
Just add a fictional provision that makes tax zero

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Replying to Paul Crowley:
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By Justin Bryant
13th Jan 2022 10:29

But that is the very case I mentioned above! Yes; why use these people when you can equally take your pick of any potential legal claim provision (there's a lot to choose from as most businesses are in breach of one thing or another without any real prospect of litigation/claims thereto).

Also, GDPR is not a great one to pick re W&E (and/or fine disallowance) even if the provision is genuine. See by analogy:https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j12292/TC...

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Replying to Justin Bryant:
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By Hooper00
17th Jun 2022 12:35

You're just giving an opinion without actually looking into the intricacies of how a GDPR provision is calculated and produced. You cannot "equally take your pick of any potential legal claim provision" unless you can justify it with legal expertise and reliably estimate the likely obligation. The provision shall then be recognised.

GDPR is complex and it's not just a matter of choosing what breach you ought to provide for, it consists of assessing a business' achieved levels of compliance and their data handling procedures; the risks and value can then be calculated.

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Replying to Paul Crowley:
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By Hooper00
17th Jun 2022 11:54

You haven't looked in to the service enough if you believe this is the case. Although it follows standard accounting practice, the fundamentals are based around Data Privacy Legislation and not accountancy - it simply applies established legal requirements.

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By ireallyshouldknowthisbut
13th Jan 2022 11:11

Justin, the words "bent as a nine bob note" spring to mind.

Its a shame HMRC dont run an efficient "whistle blower" system whereby such schemes can be 'shopped' and effective action is then taken in a matter of days to pull their websites and investigate the scheme promoters. No doubt the same old faces pushing a new variant of fraudulent claims on the tax payer and public purse.

Such an outfit would pay for itself within months.

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Replying to ireallyshouldknowthisbut:
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By Justin Bryant
13th Jan 2022 11:30

The words "HMRC" and "efficient" don't sit too well in the same sentence do they?

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Replying to Justin Bryant:
By ireallyshouldknowthisbut
13th Jan 2022 11:51

indeed, they are too busy wasting time with the magic world of MTD to do boring old boots on the ground compliance work.

Hire 1,000 competent tax inspectors, put 25% on missing traders, 25% on rooting out bad accounting practices with dodgy claims and the other half on the public DIY efforts (which will scoop up many a bad accounting practice hiding behind their client's log ins) and they would be closing the tax gap in no time.

But nope, the computer will solve it all.

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Replying to ireallyshouldknowthisbut:
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By Justin Bryant
13th Jan 2022 13:31

Agreed. If HMRC are reading this here's a free simple and cheap tax recovery tip. Presumably HMRC do the AML supervision for the above firms, so just get a list of all their clients and bingo! A few easy £millions in recovered tax. If HMRC isn't the AML supervisor, just send an information notice to these firms for these details.

On which subject, this from the link below gave me a good laugh:

"HMRC makes sure every taxpayer, no matter what their size, pays everything they owe"

https://www.gov.uk/government/news/hmrc-responses-to-inaccurate-claims

And this: "Robust measures were put in place to control error and fraud in the key coronavirus support schemes. The controls put in place delivered results"

Who are they kidding?

If you have any pub clients, perhaps you can tell them to provide and save tax on this similarly unlikely potential claim?:

https://www.solicitorsjournal.com/sjarticle/Council%20settles%20case%20o...

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By Paul D Utherone
13th Jan 2022 18:37

Oooo look...the Head Office of the DPOA I presume :) https://ghostmail.co.uk/61-bridge-street/

And funnily enough that's also the address for Citadel who are providing a claim service for DPOA members :D

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By Hooper00
17th Jun 2022 12:10

"* an independent accounting expert would presumably value the provision at £nil, given the realistic risk in practice of a typical company with GDPR breaches being successfully sued (including settling in damages) for that."

An independent accounting expert is not an expert on Data Privacy Legislation, therefore has no justification in evaluating the risks associated with data. The "realistic risk" is that these liabilities are real and have accrued in businesses, and if quantified, should be provided for in the accounts. The ICO increased their fining by over 1500% between 2020 and 2021 so GDPR breaches and fining is clearly a big issue for businesses.

Also, GDPR is an ongoing issue with complex legislation to adhere to so it is likely that some level of provision would need to be retained as data collection, storage and usage continues in line with the business.

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Replying to Hooper00:
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By Hugo Fair
17th Jun 2022 12:24

Declare your interest!

Crossword clue: Erdoğan objects to eating the offensive 1950s U.S. marine term

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Replying to Hooper00:
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By Justin Bryant
17th Jun 2022 13:20

Hooper00 (Member Since: 17th Jun 2022), you're very obviously connected with the promoter of this totally garbage tax scheme (just like Carlh here with BW schemes). No reputable accounting firm would have anything to do with it. Furthermore, what happens when the smoke & mirrors provision reverses at a higher CT rate after 1.4.23?

I note cronertaxwise agree with me per the link below (although they phrase things rather more politely):

https://www.cronertaxwise.com/community/my-vip-tax-team-question-of-the-...

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Replying to Justin Bryant:
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By Hooper00
17th Jun 2022 14:54

Again, you're giving an opinion based off assumptions on what you think you know and without understanding everything that's involved.

That article is talking about R&D, completely different to a GDPR provision. Although businesses can receive a rebate based on a recommended provision, it isn't solely a "tax scheme" it's more about identifying the levels of compliance and risks associated with data and then providing for it in the company accounts.

The only part that slightly relates is:

"It is unclear whether such a cost can be estimated with sufficient accuracy, unless the company may already be underway with some GDPR reform, or under investigation. Further, if any element of the future cost relates to penalties or fines for illegal actions, then it is unlikely that it would be allowable revenue expenditure."

Again, this is an assumption without finding out what the process entails. The likely costs can be estimated, reliably and accurately! Correct, it wouldn't be allowable revenue expenditure because it isn't R&D.

Any reversal would be planned and executed on a case by case basis and it's understood that a GDPR provision may not be suitable for every business - it is likely some level of provision will be retained as GDPR is an ongoing issue and regardless of how compliant a business is there are still incidences where breaches can happen. Therefore, fully releasing the provision wouldn't be prudent.

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Replying to Hooper00:
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By Justin Bryant
17th Jun 2022 15:38

Your answer there is self-evidently total bo llocks.

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Replying to Justin Bryant:
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By Tax Dragon
17th Jun 2022 15:47

Except

Hooper00 wrote:

Correct, it wouldn't be allowable revenue expenditure

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Replying to Tax Dragon:
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By Justin Bryant
17th Jun 2022 15:55

It wouldn't be any kind of GAAP expense in the 1st place for the reasons given by me (and cronertaxwise) above. The whole thing is obviously a total scam.

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Replying to Justin Bryant:
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By Tax Dragon
17th Jun 2022 16:04

Because it's a contingent liability and not an actual obligation? That's a fair point Justin. You're on form today.

But I wondered what the new contributor thought the idea was, since they acknowledged it wasn't allowable, was my point.

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Replying to Tax Dragon:
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By Justin Bryant
17th Jun 2022 16:05

It ain't even contingent. It's all smoke and bl oody mirrors. Only an idiot wouldn't see that.

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Replying to Justin Bryant:
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By Tax Dragon
17th Jun 2022 16:10

But the best bit.... you'll never be able to pay a dividend again, borrow again... your company will probably never be solvent again... because we've destroyed your financials for you. (We had to burn them to generate the smoke.)

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By Tax Dragon
17th Jun 2022 15:08

BIM42955 wrote:

Payment to compensate for illegal actions

The trade purpose test is unlikely to be met where the payment results from illegal actions such as:

•fines – see BIM42515, Cattermole v Borax Chemicals Ltd [1949] 31 TC 202 (see BIM38525) and Fairrie v Hall [1947] 28 TC 200 (see BIM38530)

•breaches of contract or legal action outside the trading activities – see Knight v Parry [1972] 48 TC 580 (see BIM38545) and Hammond Engineering Co Ltd v CIR [1975] 50 TC 313 (see BIM38550)

But a payment which is solely for trade purposes and not by way of penalty for an infraction of the law is deductible, see G Scammell & Nephew Ltd v Rowles [1939] 22 TC 479 (see BIM38535) and Golder v Great Boulder Proprietary Gold Mines Ltd [1952] 33 TC 75 (see BIM38540).

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By Tax Dragon
18th Jun 2022 07:11

I looked at the links in the OP. (I belatedly saw Paul's amusing post re the head office.) The suggestion is not that a for-profit entity should make a provision in its accounts, but that it has a legal requirement to put money aside to meet GDPR claims. (A bit like an insurance company has to have enough at the bank, as it were, to meet expected claims.)

It's not clear how you get from that proposal to there being tax refunds available - an insurance company doesn't get a deduction for the money it has at the bank.

Talking of insurance... wouldn't that be the appropriate way for an entity at risk of random, large expenses such as the companies in the OP posit to manage that risk? Just as, indeed, insurers manage their exposure with reinsurance.

I wouldn't have a problem with the tax deductibility of the premiums.

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Replying to Tax Dragon:
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By Justin Bryant
18th Jun 2022 10:13

TD, you show yet again your ignorance of how the P&L interacts with the tax computation. I assume you are not trained in how accounts and tax work or anything basic like that. The scheme is just a phoney (i.e. BS and I don't mean balance sheet there) tax deductible provision. Just like phoney R&D tax credits.

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Replying to Justin Bryant:
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By Tax Dragon
18th Jun 2022 22:38

Justin, my main point is simply that, if someone is concerned about exposure to financial risk re GDPR, they could consider insurance.

But I think you underestimate the dishonesty of the tax refund companies in the OP - and that was my secondary point. It's not me saying the P&L is disassociated from the tax; it's them saying the tax refund does not rely on accountancy. You say (and I agree) it relies on a provision; that's an accounting concept, yes? (Obviously the provision is incorrect and obviously even if it is made it should be added back in the tax comp. This much dishonesty is sadly predictable... but they also lie to the client.)

Of course what they really mean by "it's not accountancy" is "don't ask your accountant" - because they know any accountant with half a brain will point out the whole thing is..., well, is BS, as you put it.

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By ra929
30th Nov 2022 11:53

Hi Justin, do you know much about these GDPR Tax Reclaims, and what would your personal advice/opinion be with these? Is it worth going for, or best to stay away?

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Replying to ra929:
By Ruddles
30th Nov 2022 12:12

I wouldn't presume to speak for Justin, but did you not bother to read his 'question'?

One word in the heading alone should give you a clue as to his opinion.

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Replying to Ruddles:
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By Justin Bryant
30th Nov 2022 12:13

Some people are just amazing, aren't they?!

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Replying to Justin Bryant:
By Ruddles
17th Feb 2023 17:39

Point 5 appears to be the killer for me (although I suspect that with the bulk of our clients we would struggle to get that far).

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By Justin Bryant
04th Jul 2023 16:54

I see DN is a bit late to this particular party (with no credit for my post above that I note comes top of a "GDPR tax provision" Google search and was the 1st public outing of this dodgy scheme - around 1 1/2 years ago).

https://www.taxpolicy.org.uk/2023/06/28/gdpr_tax_credits/

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Replying to Justin Bryant:
By Ruddles
04th Jul 2023 18:21

Indeed. And I have reinstated the acknowledgment of such in today’s AWeb article.

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