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Should we leave it to HMRC to invoke discovery provisions?
I’ve recently taken on a number of clients from a firm that has closed down in my area – the clients came to me independently: I didn’t take over the previous firm’s business.
It is clear that the former adviser was somebody who put many clients – including some that I have taken on – into the General Data Protection Regulation (GDPR) provision scheme which HMRC highlighted in Spotlight 65.
Most of the clients I have taken on who did this scheme understood that it did not work and I am working with them to submit revised returns for the in-date year and to make a disclosure to HMRC for earlier years.
However two of them have taken a different view. One has said that he is prepared to submit a revised return for the in-date year but says that it is up to HMRC to make a discovery for the earlier year and he thinks that he had a defence, because the profit and loss account and tax computation clearly drew attention to the fact that a provision had been made for future GDPR-related liabilities (including a brief note on how it was calculated). He therefore has said that if HMRC decides to enquire into the earlier years then he will accept that he will have to accept that the scheme does not work, but he has said to me that ‘he doesn’t think that it is his responsibility to do HMRC’s job’ – it is up to the department to invoke the discovery provisions.
The second client has simply refused to engage with the issue and therefore I have disengaged him.
I have two questions. For the first client, is there any merit at all in what he suggests and that it is up to HMRC to make a discovery? I am very uncomfortable with this but want to be sure that I am right in standing my ground and insisting that he makes a full disclosure.
As far as the second case is concerned the taxpayer is no longer my client. As I did not prepare any returns or accounts in which the GDPR provision was included I am sure that I have no obligation to HMRC. But do I have a responsibility to make an anti-money laundering report? I assume that the ‘client’ will either find another adviser who is prepared to overlook the issue or else not engage an advisor at all and represent himself. So I assume, though I don’t have absolutely proof, that he will not do anything to regularise the position.
I am sure that the answer to the first question is that I can’t continue to act and that the answer to the second is that I must make an anti-money laundering report but this is new territory for me and I would appreciate reassurance from other readers that I am doing the right thing.
Query 20,467 – Black and white.
Most efficient way to get tax relief on equipment.
We have recently taken on a new client, husband and wife, who operate 12 buy to let properties.
The husband provides maintenance services to the property business, and the wife deals with the administration.
Neither have any other sources of income.
In order to gain tax relief on a van and computer equipment it has been suggested that the husband and wife register as self-employed and invoice the property business for their services.
I have searched HMRC PIM manuals but I cannot find anything that would specifically deny this?
Readers’ views would be appreciated.
Query 20,468 – Westminster.
Tax implications of remitting monies to the UK.
A husband and wife emigrated from South Africa and permanently settled in the UK around eight years ago. The wife received a pension after tax was deducted from her former employer in South Africa; this was not a state pension.
She died in the UK two months after her 75th birthday. Currently around the equivalent of £100,000 would be partly taxed in South Africa and the husband is now enquiring as to the UK tax implications if the monies were to be remitted to this country by him as beneficiary.
I am aware of HMRC guidance of EIM75550. Can Taxation readers offer their views on this situation?
Query 20,469 – Old Cardiffian.
Supplies invoice issued late.
One of my clients has an unusual VAT problem with partial exemption. His business purchased computer consultancy services for £80,000 plus VAT, and the expense is linked to both his exempt and taxable supplies ie, a business overhead.
The expenditure related to the first quarter of 2024 but the consultant delayed issuing his invoice until 1 May 2024 for no apparent reason other than he was too busy to issue invoices.
My client’s taxable income has declined since 1 April 2024, so my view is that we should claim input tax of 65% on the invoice, ie £16,000 x 65%, which was the partial exemption recovery rate for the year ended 31 March 2024.
However, a colleague disagrees and says that the invoice date is the only date that can be used for input tax purposes, producing a recovery rate which will be about 45% rather than 65%. What do readers think? Should we ask the consultant to issue an invoice with an earlier date?
Query 20,470 – Partial Pam.
Queries and replies
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