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The Santa Files, Part 1: Handover note

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14th Dec 2015
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It’s crunch time for Father Christmas at this time of year and he’s turned to a new business adviser to help guide him through the challenges ahead. Woods Squared is happy to have won this prestigious engagement and in the spirit of Christmas they are opening their doors to let other accountants observe and participate in their work with the client.

Join us on this seasonal adventure as we try to ensure Santa has the right strategy in place to hit his seasonal targets with the minimum of fuss. Here, in a world first made possible by the intervention of analysis software provider Panalitix, AccountingWEB is proud to pubish a handover letter from the previous accountant in the opening instalment of this fascinating “behind the scenes” engagement.

Dancer, Prancer and Donner
Harnessed Tax Advisers
Po Box 999
NP1 0GG

Letter to Woods Squared

Re Mr. Nicholas Saint

Dear Mr Woods,

Thank you for your recent letter which reached me safely this morning, a trifle singed and sooty but nevertheless, legible. Please send any future correspondence by conventional mail as we experience seasonal flue problems around this time of year

Nick has been a client of this firm for longer than our records can say but we believe we can provide sufficient for your requirements.

Date of birth - unknown

Place of birth - Anatolia, Nick’s memory of his earlier years is, sadly, unreliable but we were able, in the course of identity verification, to unearth sufficient third-party evidence to be reasonably sure of this.

Domicile

This is a source of continuing disputes with both the Finland Revenue and HMRC. So far as we have ascertained, Anatolia (in what is now Turkey, the source of Nick’s annual joke about having had the original Christmas Turkey) was in the Roman Empire at the time of Nick’s birth but we have no information as to the domicile of his father. A copy of the parchment agreeing domicile of origin as Turkey is attached. I apologise for the poor quality but it is a copy of a copy and the British Museum refuses to release the original.

We consider this an academic point because he has not made any lifetime transfers that might be construed as chargeable. However, HMRC refuse to accept the argument that all the goods that he brings into the UK each year are merely deliveries in furtherance of his vocation and not personal remittances.

Remittance basis

The importance of the domicile question is to his income tax and CGT position. If HMRC succeed in their contention for UK-residence it will be necessary to consider what remittances he has made to the UK. The potential scale of this task is such that we have not, with Nick’s agreement, made any attempt to quantify the scale of any past under-declarations.

We enclose copies of the determinations and other correspondence received from HMRC as well as our responses. You will note in particular that we have appealed against these determinations and that they are listed to be heard by the Judge Howard M Snowman in the FTT (Festive Time Tribunal) at a date to be set in the future.

Residence

We attach a schedule of Nick’s residences in the UK and various Scandinavian and other locations. You will note that he customarily conducts his business at times that fall within the UK definition of night-time. The result of this is that we are satisfied that he has not in any year for which we have records spent 90 days in the UK on the basis of presence at midnight.

HMRC question this and in particular question his claimed journey records, alleging that the travel times shown on his records, while apparently with in the laws of the land, defy the laws of physics. This is among the questions to be settled at the FTT which, being a question of fact, is of critical importance. Copies of correspondence with our expert witnesses, HG Wells and Doctor Emmett Brown are attached.

In the summer, when not sourcing supplies, supervising production and managing his factories Nick stays incognito in resort hotels in various Caribbean island locations.

Business organisation

On the advice of an external adviser Nick first incorporated a company, registered in Jersey, with an office in Swindon that receives requests from UK children and passes them to a central order management centre where they are processed and referred onto warehouses and processing centres. All trade is electronic and much is automated.

The present business model in the UK is that an LLP has been formed whose members include all UK-resident companies, Santa himself and various individuals named as Rudolph, Donner, Blitzen, Comet, Vixen, Dancer, Prancer, Dasher and a number of others, some of whose names I suspect may be pseudonyms: Gnome Chomsky, Elf Garnett, Peri Mason, Elvish Presley, Elvan Davis, Alan Shugger-Plumm. I am looking into their true status as these were all previously employees of SC Holdings which is now also a member of the LLP.

HMRC is also pursuing an enquiry into transfer of assets abroad.

Benefits in Kind

One look at Nick will tell you that he is not starving. HMRC is considering whether to assess him on the hospitality he receives in the form of mince pies and brandy. They point out that this food and drink cannot be overlooked as a normal incidental of a meeting with a client because Nick assures me that he does not actually meet with any of his customers in the course of his annual delivery run.

The vehicle that Nick uses is itself a source of dispute: ownership is not clear and no manufacturer can be traced. Nick asserts that it is his own vehicle and was actually built in his own workshops in the time when he was self-employed but when he incorporated TCGA 1992 s162 is believed to have applied, implying that ownership transferred to the company.

Before incorporation there was a thorough investigation into mileage claims but no repair expenses were ever claimfed as Nick asserted that the vehicle he refers to as his sleigh was maintained pro bono by Fairy Engineering. The reply from HMRC officers states that they are prepared to believe in fairies but find the idea of a garage that doesn’t charge utterly beyond credible.

Now that it is established that the sleigh belongs to Nick’s company we have faced the question of personal benefit in kind. There is a continuing dispute over the value of the vehicle as HMRC wishes to tax the benefit in kind as 20% of the value of the asset placed at Nick’s disposal, enhanced by all subsequent improvements and modifications. Nick makes no payment for use of the sleigh and assures me that he only uses it for one night of the year, for business alone, he only keeps it at home for reasons of security and it is insured and taxed in his name (as a private goods flight vehicle) because the company could not find a competitive quote. HMRC countered this by saying that it is available for use and he has failed to make a SORN (Santa Once-yearly Reindeer-pulled at Nativity) declaration.

The reserve argument that we have used is that if there is a benefit in kind it is van benefit since the vehicle has only one seat and is otherwise adapted solely for the carrying of goods. It is wheeled and we were lucky enough to be able to produce photographic evidence of road use in the form of a print-out from a camera showing Nick on the M25 on the morning of December 25 (he was not prosecuted because the camera self destructed when trying to record the alleged speed).

Employment taxes

There is another ongoing dispute, this time concerning the precise status of Nick’s many “little helpers”. As alluded to before, they were employees until the LLP was formed.

Issues from the time of employment by the company include:

  • private elf insurance
  • gnome-working expenses
  • clothing allowances (all are expected to wear appropriate green and red clothing)
  • salary sacrifice for pension

Santa’s pension

We are currently negotiating for special protection of Santa’s pension fund which is argued to be a special case because, although his age is not known, he is verifiably over 75 and has been for approximately two millennia. However, he has not yet started to draw down any of his pensions but when he does come to do so he wishes to be able to draw down 25% of the accumulated fund tax-free should he be found to be UK-resident at the time.

General observations

I have found Nick to be an extremely genial and affable client, although his habit of not discussing what I want unless I sit on his knee was at first disconcerting to say the least.

Communication has been difficult, not least the fact that we have sent the customary requests for information without any response between April 6 and December 31 only to find a jumble of ill-assorted receipts, oranges, bank statements, walnuts, HMRC correspondence and pieces of model railway stuffed in an old sock hanging from the mantelpiece alongside another into which was crammed a cash sum equal to our long-overdue account for the preceding year. I strongly recommend that you ensure that your money-laundering procedures are beyond reproach.

Yours faithfully

Arthur Christian Andersen

This article is sponsored by Panalitix. If you want to make 2016 your best year ever, click here to see this 7 point approach.

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Replies (6)

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By Tim Vane
14th Dec 2015 09:34

Shouldn't this sort of childish humour be posted in Born Dull rather than cluttering up the news pages?

Thanks (3)
Replying to Paul Crowley:
Head of woman
By Rebecca Cave
14th Dec 2015 10:00

Where's your sense of humour Scrooge?

AKA Tim Vane.

We all need a lidl little relief at this thyme of year and I commend the author for keeping it relatively pun-lite.

Thanks (8)
By Tim Vane
14th Dec 2015 10:34

@taxwriter - I have no issue with the post, per se. I'm just saying it shouldn't be posted here. It's not news, it seems a little childish, and I can't see why it should be on the main page.

EDIT - ah, I see now that it is sponsored - which explains all.

SECOND EDIT - And of course, the recipient would have to refuse to act in any case, since with no acceptable identifying personal information there is no way to complete MLR checks and so the whole exercise seems a bit of a waste of time.

Thanks (2)
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By hwillia2
14th Dec 2015 23:26

Brillaint, absolutely brilliant

Deary me - this is superb. Taxwriter - go and do something useful, rather than trying to spoil people's fun. If it wasn't on the front page then most people wouldn't go looking deeper. This deserves a wide audience.

Hywel

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By North East Accountant
15th Dec 2015 08:50

Ho, Ho, Ho

Very good.

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By christiner
16th Dec 2015 08:56

The Santa Files: Part 1

Absolutely love it! Can't wait for the rest!

 

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