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Deadlock with HMRC: Power to the practitioner

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18th Oct 2005
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Dawn Marie DartBy Dawn-Marie Dart

This week members of AccountingWEB's community rallied around to help sole practitioner Karen Smith, who had been battling with HMRC since April. After advice was exchanged on Any Answers, HMRC officials, reversed their stance.

Karen had been querying the Revenue's decision to charge her client interest and surcharges for what it claimed was a discrepancy in her understanding of TMA 1970 s7. Karen's dealings with HMRC began to make her doubt her professional judgement, so she approached the Any Answers forum to get further perspectives on the situation and to prove to herself that she wasn't going mad!

Karen says: "The answers given on AccountingWEB certainly helped me to see the wood from the trees with regard to the legislation and gave me the confidence to dig my heels in even more than I was already doing as I knew I was right rather than just thinking I was. Mentioning that I had raised the query on a professional website and was receiving responses confirming my understanding of the legislation seemed to help the Revenue see things more clearly as well!"

Member and sole practitioner Nigel Burge from Ritchie Burge & Co offered his services and the two talked through the problem. Karen says: "I spoke to Nigel Burge in some detail and his advice was invaluable in giving me the confidence to not only take the matter further but to seek compensation for the costs involved due to HMRC taking such an unreasonable and incorrect approach."

Karen's case has highlighted the problems sole practitioners and unrepresented taxpayers face when met with the might of HMRC and the occasional reluctance of officials to admit to their mistakes.

The prospect of fighting such a huge organisation is very daunting and so it is often easier to roll over and comply with their requests. Some might argue that HMRC relies on people not questioning its official judgement. However, while Karen's case demonstrates that HMRC inspectors are not as flawless as they would have us believe, it also shows that they are willing to listen to reason and well argued public debate.

AccountingWEBs very own tax expert Rebecca Benneyworth commented on Karen's predicament: "My comments (having read the whole saga) mainly centre on the desperately poor approach of the Revenue to this. An unrepresented taxpayer would have given up long ago fighting an organisation with the skills to get this right, but which sadly failed to apply those skills appropriately. This approach to this case - which remember almost caused a highly qualified and well informed professional to doubt her case - is tantamount to an abuse of power."

Karen told us what happened next: "Having spoken to the Revenue this morning and putting forward the arguments advised via Any Answers the position has been reviewed and they have agreed that our understanding of TMA 1970 s7 is correct, with all income falling within ss(4) and ss(5)."

The decision gave Karen confidence to appeal against another HMRC decision. "The second case currently being pursued under ESC A19 had previously been rejected," she says.

"HMRC's view that the client should have notified the Inland Revenue of the requirement to complete a tax return appeared to be a fairly strong basis as to why HMRC felt that it was not reasonable for the taxpayer to believe his affairs were in order. This case is now being re-opened and reviewed again from scratch and this review will hopefully now also take place in a more favourable manner.'

Nigel Burge was amazed by what had occurred. "Immediately after I spoke to Karen on the phone, she received a call from HMRC who gave in and agreed to all that we were saying. We both think that this is a bit spooky - almost as if HMRC had been following the thread on Any Answers and finally realised that they had been wrong all along."

A decline in the depth of legislatory knowledge at the Revenue could be partially to blame for Karen's situation. Andrew Meeson, director at Spencer Bradley Meeson says: "Twenty years ago when I worked for the Revenue I had the Act committed to memory. Now they tend to ignore it and just use their own in-house translation. AccountingWEB certainly gives you the power to pursue an issue further. The problem is the vulnerable will end up paying."

The vulnerable won't end up paying as long as AccountingWEB's community keep helping single practitioners like Karen Smith to gain the confidence to stick to their guns.

Says Smith: "It's amazing that we first applied for ESC A19 in April this year and have been going back and forth for months and as soon as AccountingWEB has got involved the whole thing appears to have been settled within around 24 hours! It just goes to show that HMRC can do it when they want to - or when the right level of pressure is applied! It just strikes me as ridiculous that it should have to get to this stage and I wonder how an unrepresented taxpayer would ever cope.

"As this case shows, Any Answers is an invaluable service from the point of view of a sole practitioner, particularly in an area where my experience is fairly limited."

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By User deleted
18th Oct 2005 14:46

Any Answers??
If you go to the Any Answers section and enter a keyword in the search (such TMA S7) then you will get a list of previous "Any Answer" queries.

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By rhangus.yahoo.co.uk
18th Oct 2005 14:18

summary of case would help
we know the revenue are less than perfect and the problems to clients you mention, but what about telling us the basics of the intial problem.
no mention at all given of what Karen's problem was.

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By rhangus.yahoo.co.uk
19th Oct 2005 10:53

Easy Solution
Why on earth would you need to worry about something like this. Write to the person at IR concerned saying they are going to be made to look a laughing stock for such a ridiculous thing to say.
No need for Karen to seek extra backing just a great chance to show how silly this person has been and perhaps their bosses will give a yellow card to them for their ludicrous power trip.

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