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HMRC enquiry resurfaces after years of silence

Enquiry into Film Scheme - LLP dissolved - HMRC now chasing individual partners after 15 years

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Client invested in film partnership in 2002. HMRC enquired into LLP and never closed enquiry. The LLP was dissolved in 2009. No communication was made by HMRC to the client at any time, and HMRC have just issued a letter claiming tax based on the Ingenious film scheme where are they won and at the first tier tribunal. So my client having heard nothing at all about the enquiry for over 10 years is suddenly faced with a tax claim of which he had no knowledge, and when he was unaware of any enquiry.  I understand that an enquiry into a partnership is deemed to be an enquiry into the individual partners themselves; but surely HMRC have to contact the individuals if there is no ongoing enquiry into the partnership as it no longer exists? And shouldn't HMRC have objected to the dissolution in any event? Does the dissolution of the LLP mean that the HMRC enquiry is effectively closed? Does my client have any redress or arguments to put to HMRC?

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24th Nov 2017 15:25

Why was the enquiry never closed?

You need to keep a record of enquiries, and make sure that you either get a closure notice from HMRC or make an application to the tribunal to get it closed.

The enquiry is still there, whether or not the LLP itself is there, and it impacts on the members personally.

Why are you trying to blame HMRC, when they probably left it open on purpose.

Your client probably has a negligence action.

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By MJShone
to Portia Nina Levin
24th Nov 2017 16:11

I think to be fair to OP, (s)he's saying that neither (s)he or the client was aware, until very recently, that there was an enquiry opened. The partnership and the partnership's agent would have been aware, but the individual partners and their agents may not have been.

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to MJShone
24th Nov 2017 17:22

I think that the promoters keep participants in schemes and their agents informed of progress of enquires and litigation from time to time, at least until they go bust.

HMRC seems remise in not sending the client an APN.

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24th Nov 2017 16:23

A delay this long can probably be challenged under HRA 1998. See:
https://www.gov.uk/hmrc-internal-manuals/enquiry-manual/em1380

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to Justin Bryant
24th Nov 2017 17:15

Art 6 ECHR applies to criminal matters (including HMRC levied penalties) not to the underlying tax.

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24th Nov 2017 17:03

Many thanks. EM1380 talks about abandoning a penalty in the case of unreasonable delay. Could this be extended to either the tax or the interest? Or is that just wishful thinking?

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to davehome
24th Nov 2017 17:09

It is not wishful thinking. Various tax barristers would agree with me (otherwise, if you think about it, there would be nothing stopping HMRC deliberately/recklessly waiting 15+ years to nail you under an open enquiry, which cannot be right).

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to Justin Bryant
24th Nov 2017 17:31

Are there any reported cases or other sources to back up the tax barristers' thinking?

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to Justin Bryant
24th Nov 2017 17:41

Tax is not a punishment: Art 6 can't apply.
Art 1 of the lst protocol is limited by these words "The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary ...to secure the payment of taxes or other contributions...".

an abuse of process agument might apply, but that is a public law argument not HR.

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to Mr Trellis of N Wales
24th Nov 2017 19:11

But Art 6 is not qualified by those words in Art 1 is it and see my comments below.

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By Ruddles
to Justin Bryant
24th Nov 2017 17:49

Why would HMRC deliberately or recklessly wait until ‘nailing’ someone - what could they hope to achieve by delaying?

Once again you appear to have demonstrated your propensity for linking to irrelevant references.

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By DJKL
to Justin Bryant
24th Nov 2017 18:32

But there is something stopping them, taxpayer can apply for closure.

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24th Nov 2017 18:46

There are no Article 6 delay cases to my knowledge, but HMRC clearly accept the point per the above link so at the least you can argue LE per this case:
http://www.bailii.org/ew/cases/EWHC/Admin/2017/2881.html

Article 6 applies to civil rights and it can be submitted that debt claims are private law or civil claims as a matter of English law and so tax proceedings in England should be considered to be civil proceedings for the purposes of the Convention (but it is a complicated point and you may have to go to the CoA to win that point).

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By DJKL
to Justin Bryant
24th Nov 2017 18:33

Surely one cannot leap to any conclusions without having had sight of the correspondence between HMRC and the partnership/its agents, one surely needs to see what was discussed and possibly agreed between these parties.

Does not the duty to communicate with the individual partners rest with the appointed partner ( or agents) re the HMRC enquiry.

Accordingly is any argument the individual may/may not be able to sustain not predicated on that communication, and their scope of action may well accordingly be limited to obligations between themselves and said agent.

(as posted above, I think by Portia)

Is the rest not mere flight of fancy at present?

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to Justin Bryant
24th Nov 2017 18:34

hmrc do not accept the point per the above link hmrc are talking about penalties not tax

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to Mr Trellis of N Wales
24th Nov 2017 18:55

They may decide not to accept their manual guidance, but the following bit is unqualified isn't it (i.e. it refers to specifically to all tax compliance matters) and that's all that matters (as long as client has relied on it to not seek CN etc.)?

"One of the rights given by Article 6 of the ECHR is that a person is entitled to a fair and public hearing within a reasonable time. For tax matters, this is not restricted to proceedings before an appeal tribunal. It also relates to the whole way in which we conduct and manage a compliance check.

You should always try to avoid unreasonable delay. And that includes delay by the person, their agent or anyone else involved with the compliance check. You may need to use your formal powers (for example, use the information powers in FA08/SCH36, see CH20000+, or, where you have exhausted those powers, issue an assessment or amendment) to prompt action by the person."

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By Ruddles
to Justin Bryant
24th Nov 2017 19:25

If you’re going to quote extensively from HMRC guidance you may as well quote the whole lot - importantly the bit about the implications of HMRC falling foul of the HRA

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