HM Revenue&Customs Taxation The British Way

Taxation the British way?

Everything you wanted to know about a tax investigation - Should I go to a meeting?

HMRC employ a carrot and stick approach to interviews: the carrot is that the investigation may be solved quickly if the investigator has the chance meet the taxpayer and talk with them directly. The stick is that refusing to attend can be interpreted as non-cooperation and a penalty may be applicable.

Both the carrot and the stick are fake!

A meeting - certainly in the early part of an investigation - will not speed up an enquiry. As you would logically expect, investigators use meetings to gather information in order to open up avenues of investigation and to test known facts: to see if you are lying to them.

Here is what the HMRC Enquiry Manual tells Inspectors about how important the interview is to an investigation, in one word: “vital”

EM1821 - Working an Enquiry: Meetings: General

Meetings play a vital part in full enquiries under SA and will often be appropriate in aspect enquiries of substance. The information you need for many enquiries will consist not just of records and documentation but also of explanations from the taxpayer. It will often save time and cost all round if those explanations are obtained at a meeting, rather than by correspondence, at an early stage in the enquiry.

On some occasions an early meeting with the business’s book-keeper or accountant will be valuable in understanding how the business records were built up and link together. Such meetings should lead to a better understanding of how the accounts have been prepared and may enable some issues to be resolved without troubling the taxpayer.

Your job at this stage is to seek the information you need to check the taxpayer's return, or the particular aspect of it that you are looking into. Although you may have selected the return for enquiry because it appeared to present particular risks you should not imply that you think there are understatements until you have had an opportunity to consider the evidence.

The number of meetings, the subject matter and who attends will depend on the nature of the enquiry.

You should bear in mind, however, that meetings can be expensive and inconvenient for taxpayers. You should not seek meetings routinely when you do not need explanations from the taxpayer.

So the importance of having the very best representation when you are dealing with HM Revenue&Customs is shown above, to gain the upper hand in any Tax investigation you must get the services of someone who is used to the subterfuge and intrigue adopted by HM Revenue&Customs.

Flipping MPs – How to Avoid CGT on Your

Second Home

There has been a great deal of excitement in the press about MPs “Flipping” their properties in order to avoid capital gains tax on selling their second homes, but this is a game anyone with more than one “residence” can play. In view of the hysteria about this in the press, I should perhaps point out that it is perfectly legal tax planning!

The basic rule is that you are exempt from CGT on a gain from selling your “main residence”. You can only have one main residence at the same time (and if you are married or in a civil partnership, you can only have one between the two of you).

There is one exception to this rule - if a property has been your main residence at any time during your ownership of it, then this exemption extends to the last 36 months before you sell it, even if in fact you have another main residence during that period. The idea of the legislation is to take account of the fact that you may need to buy a new home before you manage to sell the old one, but it provides an opportunity for some useful tax planning.

If you have more than one “residence”, the law allows you to nominate which one is to be treated as your “main residence” for tax purposes and so enjoy the exemption from CGT. You must do this within two years of it becoming necessary to decide which your main residence is.

Once you have made this nomination, by writing to the tax office that deals with your tax affairs, you can subsequently vary that nomination at any time in the future, and the variation can be backdated by up to two years. In the case of a married couple or civil partnership, both must sign the nomination and any subsequent variation.

Stephen J Dann is an Online Tax advisor, with seven years of online tax advice. Using thirty six years' professional experience in UK taxation, his contact details below UKtaxadvisor

For more information, visit these contacts, click on the names below:

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Article Written By

Andrew Smith Uk

Keywords: Tax, Capital Gains, Shares, Stocks and Bonds, Income, Pensions, Annuities,

All of the information shown here, is for guidance and does not constitute advice; you must seek proper financial guidance from a qualified tax accountant etc.