HMRC wrote to a client saying that they had information suggesting he had overseas income or gains which should be reported on his tax returns. The client has an investment fund managed by St James's Place and they provide him with the information to include on his tax return. To date St James Place have said "nothing to declare" We wrote to HMRC explaining this and asked them for the source of their information to allow us to check it out and make sure we had got it right. HMRC refused to provide details. Has anyone else had this problem?
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What problem? If your client has no overseas income or gains to declare then say so to HMRC. It's Self Assessment, so you should not expect HMRC to be telling him what to put on his tax return.
If HMRC have further information and want to take things further then they'll open an enquiry which will presumably be quickly resolved if all is above board.
I have already told HMRC there is no foreign income - as far as my client knows. His investment fund is complicated and he is relying on the fund managers to provide him with appropriate detail for his tax return. However it is his tax return and if it proves to be wrong it will be his responsibility including any swinging penalties. I think it is wrong that HMRC can write to suggest that there is a problem and thus cause the client concern and then refuse to reveal details. The HMRC charter says they have to act fairly and our client is trying to work with them to make sure there isnt a problem. Why wouldn;t they disclose it - if they have any information and it's not a fishing trip / scare tactic?
If I write to the head of HMRC and suggest that I have information that he may be a child molester and should confess to the police, then I suspect I would be in very deep water (unless I could prove it). Are HMRC above the standards others have to observe?
Rubbish. If you have suspicions that the head of HMRC is a child molester then of course you should report it. Why would you get into trouble just because you couldn’t prove it? Only if your intent was malicious or deliberately false would you be in trouble. Clearly HMRC have some information and it is not up to them to tip you off as to their sources.
Of course HMRC will refuse to reveal their source! If your client is not concealing anything, he has nothing to worry about.
JD BENJAMIN
I don't think I understand the attitude here. Perhaps you are representing HMRC and think that everyone has something to hide and they can use any tactics to maximise the tax take!
This is about the way HMRC behave. For years I have seen a steady deterioration where HMRC write letters which are ridled with inaccuracies, distorted facts and outright lies. Is no one prepared to stand up and say enough is enough. So far I have seen few in the accountancy profession who have the balls to do so.
The second item under "your obligations" in the HMRC charter says "Work with us to get things right". So the taxpayer has to work with HMRC to get things right but HMRC do not have to work with the taxpayer to get things right?
If HMRC dislose thier source and my client then discovers that a part of his investment fund needs to be reported then he can do so, pay the tax and make sure its done correctly in the future.
If HMRC do not disclose and do have information do they sit on that for 2 or 3 years and then open an enquiry claim penalties and interest etc. How does that square with their charter obligations of being helpful, efficient, professional and acting with integrity.
With regard to other contributors thank you for your input. There are no bank accounts nor have there ever been any bank accounts so thats not it.
Had the same with a client of mine. Asked in no uncertain terms about overseas bank accounts, more than once - was told there weren't any. Six months into the enquiry whilst asking completely different question it transpired that there WERE some overseas accounts. This was (and in most cases IS) the trigger.With regard to other contributors thank you for your input. There are no bank accounts nor have there ever been any bank accounts so thats not it.
It's been nearly 20 years since I left HMRC, and even back then, if we came into possession of information suggesting a deficiency in a Return, we would open the enquiry without revealing what we knew. That way, if the taxpayer was attempting to conceal information, (s)he wouldn't know what we knew and would have to come clean on everything (or gamble).
This is not new behaviour.
Not to mention that this approach gives the taxpayer opportunity to show cooperation, thus mitigating penalties. (At least, it used to – I’ve no idea with penalties on misdemeanours in relation to overseas income and gains, since these have been singled out for peculiar punishment.)
Are there any foreign bank accounts? One of my clients was sitting on a virtually dormant account offshore earning £1 per year interest that hadn't been disclosed. It was the existence of the bank account rather than the interest that triggered them writing to him.
As suggested above 99% of the time these letters are prompted by an overseas bank account. Unlikely to be the St. James Place portfolio.
I'd suggest that you double check with the client that they haven't overlooked an overseas bank account.
Sometimes ringing up the HMRC office and having a friendly chat may reveal the source as well.
I would double check with St James Place, are there overseas investments in the fund?
A client had to complete a Worldwide Tax Disclosure because her fund manager had failed to supply overseas income. But this was picked up by the manager on the day of the deadline and HMRC told us they were aware that income was missed from this particular fund manager’s reports. So it could be the fund which is on the radar.