Do you trust the HMRC taxman?
There are many people out there who trust the Taxman 100%. But is it right to accept everything that HMRC say? The busy bees at Honey Bee Accountancy explain….
Should I speak to HMRC?
We always discourage our clients from directly contacting HMRC but currently HM Revenue & Customs are actively encouraging people to call them directly to resolve taxation issues. The problem with this is that HMRC aren’t always right, this may shock people but HMRC make mistakes.
An accountant can offer you expert knowledge to help you know when HMRC have given you misinformation. When HMRC give you incorrect information and you act upon it, guess who’s fault it is? Yes, it’s your fault. You must pay the penalties and interest unless you can prove that HMRC gave you the wrong information. An accountancy firm are currently involved in a legal dispute with HMRC regarding incorrect information, they requested audio of a telephone conversation. The response from HMRC was “for some reason or another HMRC delete records after a certain amount of time”. So, where does this leave the public? In a world of pain because the legal system will also side with HMRC.
The law, as decided by the judges, is little help to an unrepresented taxpayer. According to recently decided cases, individuals who wish to rely on an assurance given by HMRC must put their question to HMRC in writing, making it clear that they are seeking a considered opinion on which they wish to rely.
What mistakes do HMRC make?
Essentially HMRC can make mistakes is pretty much any area of taxation, there are many reasons for this including staff cuts, systematisation problems and the fact that a proportion of tax law is written by the private sector but enforced by HMRC (link). Over the past 6 months we’ve dealt with numerous issues that cover different aspects of tax law and some of the stories are shocking.
Sole Traders beware
A sole trader client received a tax demand for over £10,000, this obviously shocked our client. To have underpaid their tax by this amount they would have been required to earn the absolute minimum of £55,000, they most certainly didn’t. But HMRC vigorously pursued the “overdue tax”, I encouraged our client not to call HMRC in case they tried to force a settlement. After a couple of letters backwards and forwards, HMRC sent a letter to say that they had forgotten about a page on the tax return and that actually they were looking for only £800, which we have also contested. Do you think they would have found the “forgotten page” if our client had paid the £10,000?
VAT is exempt either
Another mistake was to reclassify a VAT client and reassess their VAT liability. The company were classified based upon advice from HMRC but 12 months later HMRC challenged this. They are attempted to claim around £9,000 in under paid VAT. We are currently challenging this decision as HMRC haven’t even applied their own VAT rules correctly. Honey Bee Accountancy are able to challenge this decision because we do not engage in verbal conversations with HMRC unless absolutely essential, the process may take slightly longer but we have written records as evidence. Our Busy Bees also take the precaution of backing up data on cloud storage.
These are just 2 examples of HMRC errors that have occurred recently and we believe that due to staff cuts there will be more trouble ahead. If you receive any kind of correspondence from HMRC then we strongly recommend that you seek professional advice and always securely store HMRC correspondence to back up you tax affairs as quite often no information means no defence.
Honey Bee Accounting
Carl Ford is the founder of Honey Bee Accountancy. Carl has extension knowledge of the retail and recruitment sectors which is utilised to help grow successful businesses for the clients of Honey Bee Accountancy.