Prepare for Storm

Evidence is growing that the Revenue and Customs have spent much of the last two years retraining and reworking the relatively newly established partnership between the tax inspectors (properly trained and usually astute individuals) and their new found but generally poorly accepted (and untrained in the realms of what is normally accepted as ‘taxation’) VAT colleagues.

This added to the general demise of the economy and huge deficits in the national tax yield has left small and medium sized businesses wide open to scathing and ruthless investigation on a scale never seen before.

For many sole traders, the good news is that they are normally beneath the VAT limit. This means that interest in enquiring into their tax affairs will still be to use them as training fodder for the new and inexperienced inspectors on which to cut their teeth. In my days on the books of HMRC the average yield for asmall trader’s  investigation would not normally result in a settlement of over £50,000 to include tax, interest and penalties, but nowadays anyone found to be in breach of vat limits and the related legislation could lose their house or even worse face criminal prosecution.

New legislation with draconian measures, include an increase in visits to taxpayer’s premises and enquiries sometimes worked by up to four taxmen with differing roles and I suspect with targets to meet. This means now that self-employed taxpayers have to be more vigilant than ever to try to protect their interests.

One huge change in practice is that now any appeal is to the Tax Tribunal whereas previously income tax appeals were to the General Commissioners of Taxes and VAT appeals were dealt with by vat tribunals. The General Commissioners were an independent body, which although appointed by the government, ensured that the taxpayer had recourse to a fair hearing. It’s now been replaced by an all encompassing Tribunal, whilst there to give a fair hearing, is much more formal than the former Commissioners hearings.

My firm took an appeal to one of the first of these in Edinburgh as recently as October. We found it necessary to assemble a team, which included four tax specialists. Fortunately we ensured that over the two day hearing our client got the result we were after. The danger here for the uninitiated is that not many accountants will be geared up in the way that our firm is and without skilled help the taxpayer will flounder in what is a very intimidating situation for anyone not used to such things.