A tax enquiry can be stressful and time-consuming, with the potential for financial and reputational costs for you and your business. You should be supported by trusted advisers who can guide you effectively through the process.
Our team advises wealthy individuals, owner managed businesses and entrepreneurs on dealing with disputes and investigations across all areas of tax. We have the expertise to handle disputes relating to the most complex aspects of personal and corporate tax. These include, for example, the remittance basis of taxation for non-domiciliaries, the taxation of international trusts and companies, tax arrangements for companies and individuals, including tax residence and domicile issues.
Our expertise encompasses the full range of UK taxes including income tax, capital gains tax, corporate tax, inheritance tax, stamp duty land tax and VAT. A substantial amount of the work we do involves a cross-border component.
We have significant experience providing guidance on all elements of the disputes process including HMRC’s powers, taxpayers’ rights, judicial review, tax-related penalties and the procedure for the specialist tax tribunals. One member of our team, James Austen, sits part-time as a Judge in the Tax Tribunal, hearing and determining appeals against decisions by HMRC in respect of both direct and indirect taxes. Our team also provides preventative advice so you can mitigate tax risk which may be associated with any proposed or existing arrangements.
We are committed to achieving the best outcome for you as a client. We gain a full understanding of your circumstances so we can provide solutions tailored to your specific situation. Using our in-depth knowledge HMRC practice and procedures, we always seek to negotiate a settlement which is cost effective and acceptable for both you and HMRC wherever possible. Taking a dispute to the Court or Tribunal should almost always be a last resort. However, in those cases where a settlement is either not possible or not desirable, we have the experience, ability and determination to proceed to litigation to protect our clients from attack by HMRC.
If HM Revenue and Customs suspect that you’ve underpaid tax, they will open a tax enquiry. The enquiry may involve your entire tax position or any aspect of it, including indirect taxes like customs duties, landfill taxes, gaming duties and VAT.
If there is to be an enquiry, HMRC will send a letter telling you that an investigation has been opened. This is your cue to contact Collyer Bristow’s tax team. Your first response to HMRC can be the difference between a good result and a resource-draining HMRC dispute.
HMRC is unlikely to tell you why they have opened a tax enquiry. However, some of the more common reasons include:
There are different time limits for HMRC investigations depending on the type of tax and the issue under investigation. Broadly, the investigation could go back as far as 6 years for careless tax returns and 20 years for deliberate tax evasion. As a preliminary step, we can determine whether an investigation is lawful or out of time.
Compliance-type investigations can often be concluded quickly through correspondence. Things will progress much quicker if you comply with HMRC’s reasonable requests and are transparent about your tax situation. HMRC has the power to dig into your finances in a number of ways, including issuing information notices that legally require you to hand over documents so HMRC can investigate your tax position.
For civil enquiries like these, there is no requirement to attend an interview with HMRC. There may be advantages to doing so voluntarily, but this should be strategised with your legal team.
Where criminal conduct is suspected, HMRC may request an interview under caution. They can even search premises and make an arrest. You will need immediate representation for a tax fraud investigation to give you the best chance of avoiding charges or achieving the best outcome if your case goes to trial.
If you’re facing a tax enquiry, you should seek legal help as soon as possible to reduce the risk of substantial fines, reputational damage, or even criminal charges. Our experienced tax lawyers can support you by:
We advise large corporates, owner-managed businesses and high net worth individuals on HMRC disputes, from enquiry stage through to appeals. We can also help you avoid an enquiry in the first place through structured tax planning and preventative advice. To discuss your tax investigation with our expert tax disputes solicitors, contact Collyer Bristow today.
HMRC has extensive powers to check your tax affairs at any time to make sure you’re paying the right amount of tax. This includes obtaining information from taxpayers and third parties, such as financial advisers. HMRC’s investigations may involve a full enquiry or be focused on a particular aspect of your accounts.
If you are asked to substantiate your tax position, speak to Collyer Bristow. We can help you comply with your tax obligations and defend you if you are wrongly accused of breaking the rules.
Once HMRC opens an investigation, it can serve an ‘information notice’ asking you to send them particular documents or information. Generally, you should cooperate with HMRC and provide information within the agreed timescales. This will help to establish any tax that is due and put previous mistakes right.
At the same time, you do not have to do everything HMRC says, and you have the right to challenge them if you think they are overstepping the mark.
By law, HMRC is only able to request information that is reasonably required to allow them to check your tax position. Exactly what evidence the investigation necessitates will depend on the level of enquiry and what aspect of the accounts is under investigation.
Some information requests occupy a grey area where it may be possible to protect your information. This includes requests for:
On the other side of the fence, it is possible to make voluntary disclosures to HMRC about income and gains you have not told them about before. HMRC has a fully outlined process for making voluntary disclosures and doing so can help you avoid harsh tax penalties that would be bad for your business.
With decades of experience in HMRC tax disputes, we can help you:
Tax investigations can be long and stressful, and it is wise to help HMRC close its investigation at the earliest opportunity. You can easily talk yourself into trouble if you try to handle this yourself, so please give our expert tax team a call.
Under the corporation tax and self-assessment systems, an HMRC officer has the right to make enquiries into any tax return made by a taxpayer. This can be exhausting and time-consuming, especially if you have complex tax affairs. Collyer Bristow has experience of helping taxpayers to respond fully to HMRC investigations, bringing disputes to a swift end.
A tax dispute will arise whenever an individual taxpayer or a business disagrees with a decision made by HMRC. Examples include:
Whatever type of tax dispute you are involved in, our team has the experience to guide you to a satisfying resolution.
Many tax disputes can be resolved through careful negotiation with HMRC. Where formal action is required, you generally have the option of settling the dispute in a Tax Tribunal or settling the dispute outside of court through some form of alternative dispute resolution.
For tax matters, that will often be mediation. In our experience, mediation is a cost-effective and efficient route to dispute resolution that can often help accelerate a resolution with HMRC.
In recent years, HMRC has become far tougher in collecting the tax that they believe is payable. This approach is not always warranted. We have extensive experience dealing with the tax authorities and are able to set the right tone at the outset. If necessary, we’ll enlist the help of experienced tax barristers or forensic tax investigators to support you all the way to the Tax Tribunal and court hearings if that’s what’s needed to achieve a successful outcome.
As well as supporting you through any tax dispute, we can provide you with all the help and advice you need when putting tax planning arrangements in place. Therefore, we are happy to advise on the tax issues of commercial transactions, VAT registration requirements, tax liability upon the termination of employment and so on, with our tax disputes and non-contentious tax groups working closely together to provide a seamless service.
If you are domiciled outside of the UK but reside here, you may be able to pay tax on the remittance basis. This means you will be subject to UK tax only on income and gains sourced in the UK, together with foreign income and gains that are actually brought into the UK, instead of on your worldwide income.
Someone may be regarded as a non-UK domiciliary if they spend enough time in the UK to be tax-resident, but have another country of origin or have the intention to permanently reside (and actually reside) in another country.
There are complex rules around domiciliary. We can help determine if you are deemed to be UK or non-UK domiciled for tax purposes. This is important as it can affect your liability for UK income tax and capital gains tax, as well as your entitlement to personal allowances and exemptions.
A non-domiciliary who is resident in the UK may apply to be taxed on the remittance basis, as opposed to the arising basis, when they receive foreign income and gains. In short, this means they will only pay tax on their foreign income and gains if they are brought to the UK.
If you remit only very small amounts of foreign income to the UK (i.e. less than £2,000 per year), the remittance basis applies automatically. In all other situations, you must apply to use the remittance basis of taxation. You can do this annually via your self-assessment tax return.
There are upsides and downsides to making a remittance-basis claim. Generally, you will need to consider:
In most cases, taxpayers with overseas income exceeding the personal allowance who are not long-term residents will benefit from claiming the remittance basis. However, each case needs to be reviewed on its merits. Collyer Bristow can help.
Rules regarding the remittance basis of taxation for non-domiciliaries are extremely complicated and they change rapidly. Specific advice will always be required. We specialise in advising non-domiciliaries, and can help you:
Our tax lawyers have a specialist understanding of international tax law. Working in collaboration with you, we can help you find the most efficient solution for meeting your UK tax liabilities while managing your global tax affairs.
Global investment creates layers of complexity when it comes to planning your own or your company’s taxes, not least because the tax benefits of offshore companies and trusts have been severely eroded over the years. We can help you stay compliant with complex anti-avoidance legislation and take advantage of tax-efficient options for your international trusts, companies and partnerships.
There are several advantages to running a business through an overseas company. These include fewer reporting requirements in foreign jurisdictions and confidentiality for shareholders and directors, whose identities do not have to be disclosed.
There may also be tax benefits since broadly, an offshore company only has to pay UK tax on profits arising in the UK. For non-domiciled individuals, an overseas company can be a useful structure for keeping your business from becoming a UK tax resident, giving you greater flexibility for when you move back overseas.
Permanent UK tax residents are likely to see few benefits thanks to tough anti-avoidance legislation. If you have or are considering this type of arrangement, Collyer Bristow can help you evaluate your options and work through your risks.
An offshore trust is any trust that is managed outside of the UK by trustees who are not UK tax resident. These structures are exempt from UK income tax on foreign income and can thus help you avoid a UK income tax liability.
However, the tax rules for offshore trusts are very complicated. While there are general rules that apply to all international trusts, each trust will have its own tax assessment. HMRC will look very closely at the type of trust and the residence status of the settlor, their spouse, and the beneficiaries of the trust.
Our specialist tax solicitors can help you stay compliant with regulations and ensure that the trust does not pay more tax than it has to. We can help you minimise UK income tax liabilities as well capital gains tax and inheritance tax charges on assets moving in and out of the trust.
A number of tax issues arise when someone lives in another country, owns assets overseas, or is looking to use offshore vehicles as part of their tax planning. We advise international business owners and high net worth individuals on how to achieve the most efficient use of their businesses and trust structures to achieve the maximum value, no matter where they are residents. We can help you with:
International trusts and companies involve a wide range of specialisms including tax law, corporate law, property, trusts and estates. By hiring Collyer Bristow as your full-service law firm, you’ll enjoy easy access to expert lawyers in all these areas, giving you a joined-up strategy whatever your situation.
When your business interests span the globe, talk to us. Our international tax lawyers can help you navigate the complexities of cross-border taxation with expert tax planning, structuring and dispute resolution advice.
International businesses are likely to have different group companies and subsidiaries in different tax jurisdictions. Since each jurisdiction has its own tax rates and laws, it is often possible to use these structures to gain a competitive tax advantage. A common strategy is Transfer Pricing. Here, a company in a low-tax jurisdiction charges a group company in a higher-tax jurisdiction above the normal price for goods and services. This effectively shifts group profits to the low tax company.
In the UK, HM Revenue and Customs have put legislation in place to deal with this kind of cross-border manipulation. In Transfer Pricing situations, for example, HMRC has the power to
impose an open market value on transactions to stop profits moving out of the UK.
As with many tax-minimisation schemes, there is a fine line between a lawful scheme and one that will attract the attention of the tax agencies. We can help you determine the impact of cross-border arrangements on your business, and provide you with quality advice in the event of an investigation by HMRC.
If your business has overseas group companies, is entering new markets, or is looking for a tax-efficient way to do business overseas, turn to Collyer Bristow. Our services include:
In a world with increasingly complex tax rules and heightened scrutiny, it has never been more challenging for businesses to navigate the global tax landscape. Whatever your commercial goals, we can help you navigate the maze and offer practical solutions to minimise your worldwide effective tax rate.
Of all the direct and indirect taxes you may be liable for, income tax may seem like the most straightforward. Disputes with HM Revenue and Customs are increasing, however, which suggests that compliance is more difficult than it may seem.
At Collyer Bristow, we have extensive experience supporting UK residents and non-domiciliaries with their UK income tax liability. We can help you work through all the stages of an income tax dispute with HMRC, including making an appeal.
Self-employed people, company directors, high earners and those with other forms of income to declare, like rent, must submit a tax return to HMRC annually – and errors can easily creep into the process. The onus is on the taxpayer to keep records and report all reportable income to HMRC.
If HMRC disagrees about how much tax you should pay, they will open a tax enquiry. This might happen if there are inconsistencies in your tax returns, or if HMRC suspects that you have underreported income.
High net worth individuals and those with complex tax arrangements are likely to face closer scrutiny as HMRC seeks to clamp down on tax avoidance schemes. Even arrangements that were once safely vanilla, such as IR35 rules for independent contractors, may trigger a tax investigation.
Previously, HMRC gave taxpayers an opportunity to correct under-declared income. Today, they are more likely to formally investigate a suspected tax underpayment. This includes the power to access bank accounts, pension savings, credit card transactions, travel records and more, to check that you are fully reporting income. HMRC works closely with overseas tax agencies under the Automatic Exchange of Information agreements, so it is now much easier for them to identify non-compliant taxpayers – even if the majority of their income was generated overseas.
Tax disputes can have serious consequences. You can face large financial penalties or even criminal charges if you do not comply with a tax investigation. It’s crucial to get legal advice as soon as possible to manage these risks.
If you’ve failed to report all of your income then we’ll help you sort things out with HMRC. We can help you:
Besides managing disputes, we can help with your personal income tax planning and expatriate income tax planning. Our tax advice is down-to-earth and practical. Talk to us today.
If you sell or dispose of a chargeable asset, then you have to pay capital gains tax (CGT) on the profit received. Most personal possessions worth £6,000 or more are captured by CGT rules, as well as property that is not your main home, shares that are not in a PEP or ISA, and virtually all business assets.
HM Revenue & Customs performs regular compliance checks on company tax returns and self-assessment tax returns. If you receive a nudge letter from a tax officer, or an inquiry is opened, talk to Collyer Bristow. We can help you defend your position and negotiate a favourable settlement with HMRC.
Whenever you sell a chargeable asset, CGT should be reported and paid within 30 days. It is up to you as a taxpayer to work out your gain. This is relatively straightforward where the asset is sold for market value, in which case the gain is usually the difference between what you paid for the asset and what you sold it for, minus costs.
Things get more complicated when you sell assets for less than what they are worth, give them away, or you inherited the asset – especially if you are claiming business asset disposal relief or investor’s relief.
Capital gains can also arise in other situations. Some of these, such as gains on Enterprise Investment Scheme shares, can be complex. Legal advice is essential in these situations.
HMRC conducts regular compliance checks into the tax affairs of any UK company, director or individual, and can open a tax investigation in respect of any tax liability, including capital gains tax.
The type and severity of the investigation depends on the facts of the case. At one end of the scale, HMRC may simply call for information. You should keep records evidencing your capital gains to prove your tax position. This includes invoices and receipts that show how much you paid for the asset and the value of the asset when you sold it.
At the other end of the scale is a civil action resulting in a penalty payment or even criminal action. This may happen where serious errors are made in the tax reporting and the accurate amount has not been declared.
Careful planning of asset disposals is the key to minimising capital gains tax but if you do find yourself in a tax inquiry situation, it is strongly recommended that you consult Collyer Bristow’s tax team. We can help you:
Most people are aware that inheritance tax (IHT) is charged on the estates of people who have died, as long as the estate is of a certain value. Fewer people think about the tax impact of lifetime transfers, and small business owners may not realise that IHT affects them at all. Our solicitors are recognised experts in all areas of Inheritance Tax. We can help you take advantage of the complex web of IHT reliefs and minimise the impact of a tax investigation.
Inheritance tax applies to the transfer of assets. The tax rate is 40% when the transfer takes place on death, and 20% on lifetime transfers. However, many lifetime transfers will qualify as Potentially Exempt Transfers because IHT will only be payable if the person making the gift dies within 7 years.
Beyond this basic position, there are significant complications around IHT. Disputes can and do arise around issues such as:
If HMRC believes that you have not paid the correct amount of IHT, they can open a tax investigation and impose penalties. Collyer Bristow has a strong track record in IHT-based investigations and can help defend your case.
The transfer of shares in private companies is subject to IHT, but there is a valuable relief known as business property relief. If BPR applies, then the shares can be transferred on death or during lifetime free of IHT. This highly favourable tax tool can help with the transition of share ownership to the next generation for succession planning.
The rules are complex, however, so it is important to seek expert tax advice.
Businesses that use land and buildings which are owned by individuals may also face IHT liabilities they were not expecting. Once under audit, you will have to produce valuations and make other financial disclosures in order to reach a settlement with HMRC.
If you need inheritance tax disputes advice, turn to Collyer Bristow. We have strong working knowledge of HMRC’s mindset and processes and can provide you with the best representation in negotiations, and in front of the Tax Tribunal. We have a record of successfully challenging HMRC decisions and delivering authoritative results for our clients, so talk to us today.
Stamp Duty can add significant burdens to the purchase costs of property and shares. As specialist Stamp Duty and Stamp Duty Land Tax solicitors, we can help you claim all legitimate reliefs and exemptions and comply with its complex rules.
SDLT is a tax payable by the buyer on all property purchases in England, including residential property, commercial property and some commercial leases. It is charged at a sliding rate based on the price of the property or in some cases market value. There is an extra 3% surcharge on top of standard rates for second and additional homes.
There are some legitimate exemptions from SDLT. These include first-time buyer exemptions, property transfers on divorce, and some developer part-exchange deals.
Stamp duty is also payable on the purchase of shares in the UK at a rate of 0.5% on share transactions over £1,000. This tax is known as Stamp Duty on paper transactions, and Stamp Duty Reserve Tax on electronic transactions. You pay tax on the price you pay for the shares, even if their market value is much higher.
Relief from paying the stamp duty is available for certain transactions, such as shares in foreign companies and shares acquired in rights issues. It’s always a good idea to consult an experienced tax solicitor before structuring transactions to save money on stamp duty, as there are plenty of traps for the unwary.
Our specialist stamp duty team works alongside our property and business lawyers to help ensure transactions are properly structured for SDLT with no nasty surprises. We can help:
We advise businesses of all sizes, from household names to start-ups and small to medium-sized companies. We also advise high net worth individuals buying homes for personal use, as well as property investors and developers. Whatever your situation, we ensure that SDLT issues are fully considered and, if possible, mitigated at an early stage.
The UK loses nearly £1 billion per year due to VAT fraud and HM Revenue & Customs is becoming increasingly vigilant in investigating fraudulent VAT refund claims. We are specialists in representing businesses faced with VAT inspections, and can fight your corner in a VAT fraud investigation.
HMRC VAT officers can visit your business at any time to inspect your VAT records and make sure you’re paying (or reclaiming) the right amount of VAT. Most visits are friendly. HMRC will work with you to put right any problems caused by a genuine mistake.
Sometimes, a seemingly routine VAT inspection can lead to a full investigation of all taxes, not just VAT. This may happen if a tax officer suspects VAT fraud, which could be indicated by:
HMRC has the power to impose civil penalties for VAT underpayment or they may open a criminal investigation. If this happens, you will benefit from having a specialist tax solicitor by your side to help you build a robust defence for your case.
Some types of VAT fraud are highly sophisticated and difficult to detect. Besides attracting the attention of international tax authorities, these types of scams often involve innocent businesses causing them to lose out.
One such fraud is carousel fraud, which is also known as missing trader fraud. Here, long chains of sales transactions are put in place but one trader ‘disappears’ to avoid paying VAT to the government. If you are suspected of carousel fraud, you will need a specialist solicitor to provide you with expert legal advice.
The tax litigators at Collyer Bristow are specialists in VAT investigations and VAT fraud. We draw on strong networks of forensic tax experts and tax barristers to defend your case, and can support you with both HMRC investigations and VAT-related commercial disputes. We’ve been dealing with HMRC for decades and understand their mindset, so you can be confident that you’re in good hands.
The UK tax system may seem harsh when it comes to imposing penalties for non-compliance with statutory obligations. Both businesses and individuals face automatic penalties for the late filing of tax returns, and these ratchet up significantly the longer you wait after the filing date.
If you’ve received a penalty notice from HMRC you must act fast and deliver the returns to stop the penalty from escalating. You should also speak to Collyer Bristow about the possibility of appealing your tax-related penalty assessment if you believe it is wrong.
HMRC will issue a penalty determination when their records show that a business has failed to file its return by the required date. Penalties also apply to individuals who fail to deliver their self-assessment tax return on time.
Penalties for late returns are known as tax-related penalties. They currently start at £100 and can increase to £1,000 plus up to 20% of any unpaid tax if your return is more than two years late.
You can appeal if you think that the amount shown on the penalty determination is excessive or not due. If you lodge an appeal, HMRC will conduct an internal review and either confirm their initial decision, remove the penalty, or seek to settle the penalty with you by negotiation. We are experts in dealing with HMRC and can act as your buffer in appeals, so you do not enter negotiations with them unrepresented.
Even if late-filing penalties are chargeable, you can still seek to:
HMRC considers the coronavirus pandemic a reasonable excuse for late filing. Other examples include major illness, death of a close family member, and technical problems with your software or the government’s tax portal.
Appeals are heard by the First-tier Tax Tribunal. The court has the power to decide who is right – you, or HMRC.
To arrive at the best possible result, you’ll want to negotiate with HMRC on the footing that you are prepared to contest the matter in front of a Tax Tribunal judge if necessary. You will need to give detailed reasons for appealing the penalty, so it is sensible to bring a legal expert on board at the earliest opportunity. Our experienced tax team can prepare a robust case and negotiate with HMRC the right way, maximising your chances of a successful appeal.
In today’s flexible economy, it is common for businesses to engage consultants and contractors through a limited company rather than directly with the individual. In April 2021, the tax rules changed making businesses liable for establishing the tax status of contractors who work through intermediaries. The new rules have created significant compliance challenges for organisations that rely on a flexible workforce. Find out more about IR35 and how our team can help.
IR35 is a set of tax legislation. It is designed to combat tax avoidance by contractors who supply their services to clients through an intermediary like a personal services company, but who would be an employee if the limited company was not used. These workers are called deemed employees.
If caught by IR35, the deemed employee has to pay income tax and National Insurance Contributions as if they were employed, reducing the contractor’s net income quite significantly.
The financial impact of IR35 is also significant for employers who must pay employment taxes on top of the fees paid to the contractor. This new tax is widely referred to as the “Off-Payroll Tax”.
There is no simple test to establish employment status for tax purposes. HM Revenue & Customs has issued guidance on when it would consider someone to be a deemed employee, but the guidance is not foolproof and it is easy to get things wrong.
Since employers are responsible for making status determination, they are often caught between a rock and a hard place. If they take the cautious approach and categorise a contractor as within IR35, they satisfy HMRC but open up the possibility of a dispute with the contractor, who believes he is self-employed. If they categorise a worker as outside IR35 and HMRC disagrees, they may face unexpected tax liabilities and penalties for non-compliance.
IR35 rules require the employer itself to have a dispute resolution method for status determination statements to be challenged – there is no independent body to mediate this situation. This means it is more important than ever to have your contracts and status determinations reviewed by an expert to ensure they stand up to scrutiny.
Whether you are a contractor engaged through a PSC or a business doing the engaging, speak to Collyer Bristow. Our IR35 tax team can help you:
This is a tricky area of law with a risk of significant tax penalties if you get it wrong. Our tax lawyers are highly experienced in this area and can give you practical IR35 advice that will keep you compliant, as well as protecting your long-term staffing strategy.
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Tax disputes & investigations key contacts
james.austen@collyerbristow.comPartner
Talk to James about UK trusts, tax & estate planning and Tax disputes & investigations
A number of taxpayers with HICBC appeals awaiting the outcome of the forthcoming Court of Appeal in HMRC v Wilkes have recently contacted us about correspondence received from HMRC about their 2017/18 tax position.
The Government is proposing to pass retrospective legislation to reverse the outcome of the Wilkes case so that even if we win in the Court of Appeal, other taxpayers will be unable to use the decision in their own cases.
Collyer Bristow successfully represented Jason Wilkes after HMRC issued a backdated High Income Child Benefit Charge (HICBC) bill for payments he received in 2014. This landmark ruling could have implications for thousands of parents.
More information on the implications of this decision will follow; please keep checking our website for updates. If you believe you have been similarly affected by HICBC please contact us.
The IR35 tax rules extended to the private sector from 6 April 2021. For affected contractors using their services, there are significant tax and practical consequences. We provide an overview of the changes.
Recent experience
In recent times, some taxpayers were badly advised and entered into marketed tax avoidance schemes which they did not understand and which were not suitable for them. We can help in reporting any past tax avoidance to HMRC, regularising the position, and seeking to mitigate any tax penalties which might arise.
Case study
In recent times, some taxpayers were badly advised and entered into marketed tax avoidance schemes which they did not understand and which were not suitable for them. We can help in reporting any past tax avoidance to HMRC, regularising the position, and seeking to mitigate any tax penalties which might arise.
HMRC’s crackdown on consultancy arrangements (which it is predisposed to view as income tax and national insurance avoidance) is widely reported in the press and high on HMRC’s agenda. There have recently been a number of high-profile cases in the Tax Tribunal. A persuasive case can often be made for the intended tax and employment law consequences of a consultancy arrangement. But the law in this area is developing quickly and up-to-date knowledge of the relevant principles is essential.
Case study
HMRC’s crackdown on consultancy arrangements (which it is predisposed to view as income tax and national insurance avoidance) is widely reported in the press and high on HMRC’s agenda. There have recently been a number of high-profile cases in the Tax Tribunal. A persuasive case can often be made for the intended tax and employment law consequences of a consultancy arrangement. But the law in this area is developing quickly and up-to-date knowledge of the relevant principles is essential.
Many internationally-mobile individuals have their corporate and/or trust structures based primarily outside the UK – albeit often with some UK nexus. The Statutory Residence Test simplifies the residence test for individuals, in theory at least. In reality, the rules are so complicated that detailed legal advice will often be needed – especially if HMRC make enquiries. The position of companies and trusts is more complex still, and based on case law. These structures can be made UK-resident by mistake – even if UK tax advice was taken when they were set up. We are experienced in settling these cases, in one case agreeing a payment of only 10% of the tax originally demanded by HMRC.
Case study
Many internationally-mobile individuals have their corporate and/or trust structures based primarily outside the UK – albeit often with some UK nexus. The Statutory Residence Test simplifies the residence test for individuals, in theory at least. In reality, the rules are so complicated that detailed legal advice will often be needed – especially if HMRC make enquiries. The position of companies and trusts is more complex still, and based on case law. These structures can be made UK-resident by mistake – even if UK tax advice was taken when they were set up. We are experienced in settling these cases, in one case agreeing a payment of only 10% of the tax originally demanded by HMRC.
We are seeing more and more domicile enquiries into international clients with a UK presence – even where HMRC had satisfied itself about a taxpayer’s overseas domicile relatively recently. Whilst it may be unintentional on the part of HMRC, we have noticed that some communities seem more at risk than others. Domicile is a complicated concept which is relevant to several aspects of life – including taxation. Unfortunately, HMRC officers often misunderstand the issues and domicile enquiries balloon into intrusive and unwieldy exercises in data-gathering – usually with the justification that the responses sought all add ‘context’. It is crucial to keep HMRC focussed on the real issues and to seek to limit the scope of the enquiry to the relevant points. Experience of the legal and practical considerations is essential and affected taxpayers will inevitably need early advice.
Case study
We are seeing more and more domicile enquiries into international clients with a UK presence – even where HMRC had satisfied itself about a taxpayer’s overseas domicile relatively recently. Whilst it may be unintentional on the part of HMRC, we have noticed that some communities seem more at risk than others. Domicile is a complicated concept which is relevant to several aspects of life – including taxation. Unfortunately, HMRC officers often misunderstand the issues and domicile enquiries balloon into intrusive and unwieldy exercises in data-gathering – usually with the justification that the responses sought all add ‘context’. It is crucial to keep HMRC focussed on the real issues and to seek to limit the scope of the enquiry to the relevant points. Experience of the legal and practical considerations is essential and affected taxpayers will inevitably need early advice.
Each year, HMRC select a number of individuals or businesses at random for a compliance check. In all but the most straightforward cases, taxpayers selected for a check should quickly seek legal advice. It is usually prudent to assume that you have been deliberately selected rather than chosen at random. HMRC investigations can be time-consuming and stressful and it often helps to have a professional on your side to deal with the Revenue. Experience shows that HMRC does not always act within its powers and an experienced solicitor can frequently narrow the scope of the enquiry – and reduce any potential tax liability.
Case study
Each year, HMRC select a number of individuals or businesses at random for a compliance check. In all but the most straightforward cases, taxpayers selected for a check should quickly seek legal advice. It is usually prudent to assume that you have been deliberately selected rather than chosen at random. HMRC investigations can be time-consuming and stressful and it often helps to have a professional on your side to deal with the Revenue. Experience shows that HMRC does not always act within its powers and an experienced solicitor can frequently narrow the scope of the enquiry – and reduce any potential tax liability.
Related content
Disputes with HMRC can arise for any number of reasons. There may have been a mistake which needs to be remedied; HMRC may want more evidence to substantiate your tax position; or there may be a disagreement over how the law should be applied.
A tax enquiry can be stressful and time-consuming, with the potential for financial and reputational costs for you and your business. You should be supported by trusted advisers who can guide you effectively through the process.
Our team advises wealthy individuals, owner managed businesses and entrepreneurs on dealing with disputes and investigations across all areas of tax. We have the expertise to handle disputes relating to the most complex aspects of personal and corporate tax. These include, for example, the remittance basis of taxation for non-domiciliaries, the taxation of international trusts and companies, tax arrangements for companies and individuals, including tax residence and domicile issues.
Our expertise encompasses the full range of UK taxes including income tax, capital gains tax, corporate tax, inheritance tax, stamp duty land tax and VAT. A substantial amount of the work we do involves a cross-border component.
We have significant experience providing guidance on all elements of the disputes process including HMRC’s powers, taxpayers’ rights, judicial review, tax-related penalties and the procedure for the specialist tax tribunals. One member of our team, James Austen, sits part-time as a Judge in the Tax Tribunal, hearing and determining appeals against decisions by HMRC in respect of both direct and indirect taxes. Our team also provides preventative advice so you can mitigate tax risk which may be associated with any proposed or existing arrangements.
We are committed to achieving the best outcome for you as a client. We gain a full understanding of your circumstances so we can provide solutions tailored to your specific situation. Using our in-depth knowledge HMRC practice and procedures, we always seek to negotiate a settlement which is cost effective and acceptable for both you and HMRC wherever possible. Taking a dispute to the Court or Tribunal should almost always be a last resort. However, in those cases where a settlement is either not possible or not desirable, we have the experience, ability and determination to proceed to litigation to protect our clients from attack by HMRC.
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If HM Revenue and Customs suspect that you’ve underpaid tax, they will open a tax enquiry. The enquiry may involve your entire tax position or any aspect of it, including indirect taxes like customs duties, landfill taxes, gaming duties and VAT.
If there is to be an enquiry, HMRC will send a letter telling you that an investigation has been opened. This is your cue to contact Collyer Bristow’s tax team. Your first response to HMRC can be the difference between a good result and a resource-draining HMRC dispute.
HMRC is unlikely to tell you why they have opened a tax enquiry. However, some of the more common reasons include:
There are different time limits for HMRC investigations depending on the type of tax and the issue under investigation. Broadly, the investigation could go back as far as 6 years for careless tax returns and 20 years for deliberate tax evasion. As a preliminary step, we can determine whether an investigation is lawful or out of time.
Compliance-type investigations can often be concluded quickly through correspondence. Things will progress much quicker if you comply with HMRC’s reasonable requests and are transparent about your tax situation. HMRC has the power to dig into your finances in a number of ways, including issuing information notices that legally require you to hand over documents so HMRC can investigate your tax position.
For civil enquiries like these, there is no requirement to attend an interview with HMRC. There may be advantages to doing so voluntarily, but this should be strategised with your legal team.
Where criminal conduct is suspected, HMRC may request an interview under caution. They can even search premises and make an arrest. You will need immediate representation for a tax fraud investigation to give you the best chance of avoiding charges or achieving the best outcome if your case goes to trial.
If you’re facing a tax enquiry, you should seek legal help as soon as possible to reduce the risk of substantial fines, reputational damage, or even criminal charges. Our experienced tax lawyers can support you by:
We advise large corporates, owner-managed businesses and high net worth individuals on HMRC disputes, from enquiry stage through to appeals. We can also help you avoid an enquiry in the first place through structured tax planning and preventative advice. To discuss your tax investigation with our expert tax disputes solicitors, contact Collyer Bristow today.
HMRC has extensive powers to check your tax affairs at any time to make sure you’re paying the right amount of tax. This includes obtaining information from taxpayers and third parties, such as financial advisers. HMRC’s investigations may involve a full enquiry or be focused on a particular aspect of your accounts.
If you are asked to substantiate your tax position, speak to Collyer Bristow. We can help you comply with your tax obligations and defend you if you are wrongly accused of breaking the rules.
Once HMRC opens an investigation, it can serve an ‘information notice’ asking you to send them particular documents or information. Generally, you should cooperate with HMRC and provide information within the agreed timescales. This will help to establish any tax that is due and put previous mistakes right.
At the same time, you do not have to do everything HMRC says, and you have the right to challenge them if you think they are overstepping the mark.
By law, HMRC is only able to request information that is reasonably required to allow them to check your tax position. Exactly what evidence the investigation necessitates will depend on the level of enquiry and what aspect of the accounts is under investigation.
Some information requests occupy a grey area where it may be possible to protect your information. This includes requests for:
On the other side of the fence, it is possible to make voluntary disclosures to HMRC about income and gains you have not told them about before. HMRC has a fully outlined process for making voluntary disclosures and doing so can help you avoid harsh tax penalties that would be bad for your business.
With decades of experience in HMRC tax disputes, we can help you:
Tax investigations can be long and stressful, and it is wise to help HMRC close its investigation at the earliest opportunity. You can easily talk yourself into trouble if you try to handle this yourself, so please give our expert tax team a call.
Under the corporation tax and self-assessment systems, an HMRC officer has the right to make enquiries into any tax return made by a taxpayer. This can be exhausting and time-consuming, especially if you have complex tax affairs. Collyer Bristow has experience of helping taxpayers to respond fully to HMRC investigations, bringing disputes to a swift end.
A tax dispute will arise whenever an individual taxpayer or a business disagrees with a decision made by HMRC. Examples include:
Whatever type of tax dispute you are involved in, our team has the experience to guide you to a satisfying resolution.
Many tax disputes can be resolved through careful negotiation with HMRC. Where formal action is required, you generally have the option of settling the dispute in a Tax Tribunal or settling the dispute outside of court through some form of alternative dispute resolution.
For tax matters, that will often be mediation. In our experience, mediation is a cost-effective and efficient route to dispute resolution that can often help accelerate a resolution with HMRC.
In recent years, HMRC has become far tougher in collecting the tax that they believe is payable. This approach is not always warranted. We have extensive experience dealing with the tax authorities and are able to set the right tone at the outset. If necessary, we’ll enlist the help of experienced tax barristers or forensic tax investigators to support you all the way to the Tax Tribunal and court hearings if that’s what’s needed to achieve a successful outcome.
As well as supporting you through any tax dispute, we can provide you with all the help and advice you need when putting tax planning arrangements in place. Therefore, we are happy to advise on the tax issues of commercial transactions, VAT registration requirements, tax liability upon the termination of employment and so on, with our tax disputes and non-contentious tax groups working closely together to provide a seamless service.
If you are domiciled outside of the UK but reside here, you may be able to pay tax on the remittance basis. This means you will be subject to UK tax only on income and gains sourced in the UK, together with foreign income and gains that are actually brought into the UK, instead of on your worldwide income.
Someone may be regarded as a non-UK domiciliary if they spend enough time in the UK to be tax-resident, but have another country of origin or have the intention to permanently reside (and actually reside) in another country.
There are complex rules around domiciliary. We can help determine if you are deemed to be UK or non-UK domiciled for tax purposes. This is important as it can affect your liability for UK income tax and capital gains tax, as well as your entitlement to personal allowances and exemptions.
A non-domiciliary who is resident in the UK may apply to be taxed on the remittance basis, as opposed to the arising basis, when they receive foreign income and gains. In short, this means they will only pay tax on their foreign income and gains if they are brought to the UK.
If you remit only very small amounts of foreign income to the UK (i.e. less than £2,000 per year), the remittance basis applies automatically. In all other situations, you must apply to use the remittance basis of taxation. You can do this annually via your self-assessment tax return.
There are upsides and downsides to making a remittance-basis claim. Generally, you will need to consider:
In most cases, taxpayers with overseas income exceeding the personal allowance who are not long-term residents will benefit from claiming the remittance basis. However, each case needs to be reviewed on its merits. Collyer Bristow can help.
Rules regarding the remittance basis of taxation for non-domiciliaries are extremely complicated and they change rapidly. Specific advice will always be required. We specialise in advising non-domiciliaries, and can help you:
Our tax lawyers have a specialist understanding of international tax law. Working in collaboration with you, we can help you find the most efficient solution for meeting your UK tax liabilities while managing your global tax affairs.
Global investment creates layers of complexity when it comes to planning your own or your company’s taxes, not least because the tax benefits of offshore companies and trusts have been severely eroded over the years. We can help you stay compliant with complex anti-avoidance legislation and take advantage of tax-efficient options for your international trusts, companies and partnerships.
There are several advantages to running a business through an overseas company. These include fewer reporting requirements in foreign jurisdictions and confidentiality for shareholders and directors, whose identities do not have to be disclosed.
There may also be tax benefits since broadly, an offshore company only has to pay UK tax on profits arising in the UK. For non-domiciled individuals, an overseas company can be a useful structure for keeping your business from becoming a UK tax resident, giving you greater flexibility for when you move back overseas.
Permanent UK tax residents are likely to see few benefits thanks to tough anti-avoidance legislation. If you have or are considering this type of arrangement, Collyer Bristow can help you evaluate your options and work through your risks.
An offshore trust is any trust that is managed outside of the UK by trustees who are not UK tax resident. These structures are exempt from UK income tax on foreign income and can thus help you avoid a UK income tax liability.
However, the tax rules for offshore trusts are very complicated. While there are general rules that apply to all international trusts, each trust will have its own tax assessment. HMRC will look very closely at the type of trust and the residence status of the settlor, their spouse, and the beneficiaries of the trust.
Our specialist tax solicitors can help you stay compliant with regulations and ensure that the trust does not pay more tax than it has to. We can help you minimise UK income tax liabilities as well capital gains tax and inheritance tax charges on assets moving in and out of the trust.
A number of tax issues arise when someone lives in another country, owns assets overseas, or is looking to use offshore vehicles as part of their tax planning. We advise international business owners and high net worth individuals on how to achieve the most efficient use of their businesses and trust structures to achieve the maximum value, no matter where they are residents. We can help you with:
International trusts and companies involve a wide range of specialisms including tax law, corporate law, property, trusts and estates. By hiring Collyer Bristow as your full-service law firm, you’ll enjoy easy access to expert lawyers in all these areas, giving you a joined-up strategy whatever your situation.
When your business interests span the globe, talk to us. Our international tax lawyers can help you navigate the complexities of cross-border taxation with expert tax planning, structuring and dispute resolution advice.
International businesses are likely to have different group companies and subsidiaries in different tax jurisdictions. Since each jurisdiction has its own tax rates and laws, it is often possible to use these structures to gain a competitive tax advantage. A common strategy is Transfer Pricing. Here, a company in a low-tax jurisdiction charges a group company in a higher-tax jurisdiction above the normal price for goods and services. This effectively shifts group profits to the low tax company.
In the UK, HM Revenue and Customs have put legislation in place to deal with this kind of cross-border manipulation. In Transfer Pricing situations, for example, HMRC has the power to
impose an open market value on transactions to stop profits moving out of the UK.
As with many tax-minimisation schemes, there is a fine line between a lawful scheme and one that will attract the attention of the tax agencies. We can help you determine the impact of cross-border arrangements on your business, and provide you with quality advice in the event of an investigation by HMRC.
If your business has overseas group companies, is entering new markets, or is looking for a tax-efficient way to do business overseas, turn to Collyer Bristow. Our services include:
In a world with increasingly complex tax rules and heightened scrutiny, it has never been more challenging for businesses to navigate the global tax landscape. Whatever your commercial goals, we can help you navigate the maze and offer practical solutions to minimise your worldwide effective tax rate.
Of all the direct and indirect taxes you may be liable for, income tax may seem like the most straightforward. Disputes with HM Revenue and Customs are increasing, however, which suggests that compliance is more difficult than it may seem.
At Collyer Bristow, we have extensive experience supporting UK residents and non-domiciliaries with their UK income tax liability. We can help you work through all the stages of an income tax dispute with HMRC, including making an appeal.
Self-employed people, company directors, high earners and those with other forms of income to declare, like rent, must submit a tax return to HMRC annually – and errors can easily creep into the process. The onus is on the taxpayer to keep records and report all reportable income to HMRC.
If HMRC disagrees about how much tax you should pay, they will open a tax enquiry. This might happen if there are inconsistencies in your tax returns, or if HMRC suspects that you have underreported income.
High net worth individuals and those with complex tax arrangements are likely to face closer scrutiny as HMRC seeks to clamp down on tax avoidance schemes. Even arrangements that were once safely vanilla, such as IR35 rules for independent contractors, may trigger a tax investigation.
Previously, HMRC gave taxpayers an opportunity to correct under-declared income. Today, they are more likely to formally investigate a suspected tax underpayment. This includes the power to access bank accounts, pension savings, credit card transactions, travel records and more, to check that you are fully reporting income. HMRC works closely with overseas tax agencies under the Automatic Exchange of Information agreements, so it is now much easier for them to identify non-compliant taxpayers – even if the majority of their income was generated overseas.
Tax disputes can have serious consequences. You can face large financial penalties or even criminal charges if you do not comply with a tax investigation. It’s crucial to get legal advice as soon as possible to manage these risks.
If you’ve failed to report all of your income then we’ll help you sort things out with HMRC. We can help you:
Besides managing disputes, we can help with your personal income tax planning and expatriate income tax planning. Our tax advice is down-to-earth and practical. Talk to us today.
If you sell or dispose of a chargeable asset, then you have to pay capital gains tax (CGT) on the profit received. Most personal possessions worth £6,000 or more are captured by CGT rules, as well as property that is not your main home, shares that are not in a PEP or ISA, and virtually all business assets.
HM Revenue & Customs performs regular compliance checks on company tax returns and self-assessment tax returns. If you receive a nudge letter from a tax officer, or an inquiry is opened, talk to Collyer Bristow. We can help you defend your position and negotiate a favourable settlement with HMRC.
Whenever you sell a chargeable asset, CGT should be reported and paid within 30 days. It is up to you as a taxpayer to work out your gain. This is relatively straightforward where the asset is sold for market value, in which case the gain is usually the difference between what you paid for the asset and what you sold it for, minus costs.
Things get more complicated when you sell assets for less than what they are worth, give them away, or you inherited the asset – especially if you are claiming business asset disposal relief or investor’s relief.
Capital gains can also arise in other situations. Some of these, such as gains on Enterprise Investment Scheme shares, can be complex. Legal advice is essential in these situations.
HMRC conducts regular compliance checks into the tax affairs of any UK company, director or individual, and can open a tax investigation in respect of any tax liability, including capital gains tax.
The type and severity of the investigation depends on the facts of the case. At one end of the scale, HMRC may simply call for information. You should keep records evidencing your capital gains to prove your tax position. This includes invoices and receipts that show how much you paid for the asset and the value of the asset when you sold it.
At the other end of the scale is a civil action resulting in a penalty payment or even criminal action. This may happen where serious errors are made in the tax reporting and the accurate amount has not been declared.
Careful planning of asset disposals is the key to minimising capital gains tax but if you do find yourself in a tax inquiry situation, it is strongly recommended that you consult Collyer Bristow’s tax team. We can help you:
Most people are aware that inheritance tax (IHT) is charged on the estates of people who have died, as long as the estate is of a certain value. Fewer people think about the tax impact of lifetime transfers, and small business owners may not realise that IHT affects them at all. Our solicitors are recognised experts in all areas of Inheritance Tax. We can help you take advantage of the complex web of IHT reliefs and minimise the impact of a tax investigation.
Inheritance tax applies to the transfer of assets. The tax rate is 40% when the transfer takes place on death, and 20% on lifetime transfers. However, many lifetime transfers will qualify as Potentially Exempt Transfers because IHT will only be payable if the person making the gift dies within 7 years.
Beyond this basic position, there are significant complications around IHT. Disputes can and do arise around issues such as:
If HMRC believes that you have not paid the correct amount of IHT, they can open a tax investigation and impose penalties. Collyer Bristow has a strong track record in IHT-based investigations and can help defend your case.
The transfer of shares in private companies is subject to IHT, but there is a valuable relief known as business property relief. If BPR applies, then the shares can be transferred on death or during lifetime free of IHT. This highly favourable tax tool can help with the transition of share ownership to the next generation for succession planning.
The rules are complex, however, so it is important to seek expert tax advice.
Businesses that use land and buildings which are owned by individuals may also face IHT liabilities they were not expecting. Once under audit, you will have to produce valuations and make other financial disclosures in order to reach a settlement with HMRC.
If you need inheritance tax disputes advice, turn to Collyer Bristow. We have strong working knowledge of HMRC’s mindset and processes and can provide you with the best representation in negotiations, and in front of the Tax Tribunal. We have a record of successfully challenging HMRC decisions and delivering authoritative results for our clients, so talk to us today.
Stamp Duty can add significant burdens to the purchase costs of property and shares. As specialist Stamp Duty and Stamp Duty Land Tax solicitors, we can help you claim all legitimate reliefs and exemptions and comply with its complex rules.
SDLT is a tax payable by the buyer on all property purchases in England, including residential property, commercial property and some commercial leases. It is charged at a sliding rate based on the price of the property or in some cases market value. There is an extra 3% surcharge on top of standard rates for second and additional homes.
There are some legitimate exemptions from SDLT. These include first-time buyer exemptions, property transfers on divorce, and some developer part-exchange deals.
Stamp duty is also payable on the purchase of shares in the UK at a rate of 0.5% on share transactions over £1,000. This tax is known as Stamp Duty on paper transactions, and Stamp Duty Reserve Tax on electronic transactions. You pay tax on the price you pay for the shares, even if their market value is much higher.
Relief from paying the stamp duty is available for certain transactions, such as shares in foreign companies and shares acquired in rights issues. It’s always a good idea to consult an experienced tax solicitor before structuring transactions to save money on stamp duty, as there are plenty of traps for the unwary.
Our specialist stamp duty team works alongside our property and business lawyers to help ensure transactions are properly structured for SDLT with no nasty surprises. We can help:
We advise businesses of all sizes, from household names to start-ups and small to medium-sized companies. We also advise high net worth individuals buying homes for personal use, as well as property investors and developers. Whatever your situation, we ensure that SDLT issues are fully considered and, if possible, mitigated at an early stage.
The UK loses nearly £1 billion per year due to VAT fraud and HM Revenue & Customs is becoming increasingly vigilant in investigating fraudulent VAT refund claims. We are specialists in representing businesses faced with VAT inspections, and can fight your corner in a VAT fraud investigation.
HMRC VAT officers can visit your business at any time to inspect your VAT records and make sure you’re paying (or reclaiming) the right amount of VAT. Most visits are friendly. HMRC will work with you to put right any problems caused by a genuine mistake.
Sometimes, a seemingly routine VAT inspection can lead to a full investigation of all taxes, not just VAT. This may happen if a tax officer suspects VAT fraud, which could be indicated by:
HMRC has the power to impose civil penalties for VAT underpayment or they may open a criminal investigation. If this happens, you will benefit from having a specialist tax solicitor by your side to help you build a robust defence for your case.
Some types of VAT fraud are highly sophisticated and difficult to detect. Besides attracting the attention of international tax authorities, these types of scams often involve innocent businesses causing them to lose out.
One such fraud is carousel fraud, which is also known as missing trader fraud. Here, long chains of sales transactions are put in place but one trader ‘disappears’ to avoid paying VAT to the government. If you are suspected of carousel fraud, you will need a specialist solicitor to provide you with expert legal advice.
The tax litigators at Collyer Bristow are specialists in VAT investigations and VAT fraud. We draw on strong networks of forensic tax experts and tax barristers to defend your case, and can support you with both HMRC investigations and VAT-related commercial disputes. We’ve been dealing with HMRC for decades and understand their mindset, so you can be confident that you’re in good hands.
The UK tax system may seem harsh when it comes to imposing penalties for non-compliance with statutory obligations. Both businesses and individuals face automatic penalties for the late filing of tax returns, and these ratchet up significantly the longer you wait after the filing date.
If you’ve received a penalty notice from HMRC you must act fast and deliver the returns to stop the penalty from escalating. You should also speak to Collyer Bristow about the possibility of appealing your tax-related penalty assessment if you believe it is wrong.
HMRC will issue a penalty determination when their records show that a business has failed to file its return by the required date. Penalties also apply to individuals who fail to deliver their self-assessment tax return on time.
Penalties for late returns are known as tax-related penalties. They currently start at £100 and can increase to £1,000 plus up to 20% of any unpaid tax if your return is more than two years late.
You can appeal if you think that the amount shown on the penalty determination is excessive or not due. If you lodge an appeal, HMRC will conduct an internal review and either confirm their initial decision, remove the penalty, or seek to settle the penalty with you by negotiation. We are experts in dealing with HMRC and can act as your buffer in appeals, so you do not enter negotiations with them unrepresented.
Even if late-filing penalties are chargeable, you can still seek to:
HMRC considers the coronavirus pandemic a reasonable excuse for late filing. Other examples include major illness, death of a close family member, and technical problems with your software or the government’s tax portal.
Appeals are heard by the First-tier Tax Tribunal. The court has the power to decide who is right – you, or HMRC.
To arrive at the best possible result, you’ll want to negotiate with HMRC on the footing that you are prepared to contest the matter in front of a Tax Tribunal judge if necessary. You will need to give detailed reasons for appealing the penalty, so it is sensible to bring a legal expert on board at the earliest opportunity. Our experienced tax team can prepare a robust case and negotiate with HMRC the right way, maximising your chances of a successful appeal.
In today’s flexible economy, it is common for businesses to engage consultants and contractors through a limited company rather than directly with the individual. In April 2021, the tax rules changed making businesses liable for establishing the tax status of contractors who work through intermediaries. The new rules have created significant compliance challenges for organisations that rely on a flexible workforce. Find out more about IR35 and how our team can help.
IR35 is a set of tax legislation. It is designed to combat tax avoidance by contractors who supply their services to clients through an intermediary like a personal services company, but who would be an employee if the limited company was not used. These workers are called deemed employees.
If caught by IR35, the deemed employee has to pay income tax and National Insurance Contributions as if they were employed, reducing the contractor’s net income quite significantly.
The financial impact of IR35 is also significant for employers who must pay employment taxes on top of the fees paid to the contractor. This new tax is widely referred to as the “Off-Payroll Tax”.
There is no simple test to establish employment status for tax purposes. HM Revenue & Customs has issued guidance on when it would consider someone to be a deemed employee, but the guidance is not foolproof and it is easy to get things wrong.
Since employers are responsible for making status determination, they are often caught between a rock and a hard place. If they take the cautious approach and categorise a contractor as within IR35, they satisfy HMRC but open up the possibility of a dispute with the contractor, who believes he is self-employed. If they categorise a worker as outside IR35 and HMRC disagrees, they may face unexpected tax liabilities and penalties for non-compliance.
IR35 rules require the employer itself to have a dispute resolution method for status determination statements to be challenged – there is no independent body to mediate this situation. This means it is more important than ever to have your contracts and status determinations reviewed by an expert to ensure they stand up to scrutiny.
Whether you are a contractor engaged through a PSC or a business doing the engaging, speak to Collyer Bristow. Our IR35 tax team can help you:
This is a tricky area of law with a risk of significant tax penalties if you get it wrong. Our tax lawyers are highly experienced in this area and can give you practical IR35 advice that will keep you compliant, as well as protecting your long-term staffing strategy.
Recent experience
Case study
In recent times, some taxpayers were badly advised and entered into marketed tax avoidance schemes which they did not understand and which were not suitable for them. We can help in reporting any past tax avoidance to HMRC, regularising the position, and seeking to mitigate any tax penalties which might arise.
Case study
HMRC’s crackdown on consultancy arrangements (which it is predisposed to view as income tax and national insurance avoidance) is widely reported in the press and high on HMRC’s agenda. There have recently been a number of high-profile cases in the Tax Tribunal. A persuasive case can often be made for the intended tax and employment law consequences of a consultancy arrangement. But the law in this area is developing quickly and up-to-date knowledge of the relevant principles is essential.
Case study
Many internationally-mobile individuals have their corporate and/or trust structures based primarily outside the UK – albeit often with some UK nexus. The Statutory Residence Test simplifies the residence test for individuals, in theory at least. In reality, the rules are so complicated that detailed legal advice will often be needed – especially if HMRC make enquiries. The position of companies and trusts is more complex still, and based on case law. These structures can be made UK-resident by mistake – even if UK tax advice was taken when they were set up. We are experienced in settling these cases, in one case agreeing a payment of only 10% of the tax originally demanded by HMRC.
Case study
We are seeing more and more domicile enquiries into international clients with a UK presence – even where HMRC had satisfied itself about a taxpayer’s overseas domicile relatively recently. Whilst it may be unintentional on the part of HMRC, we have noticed that some communities seem more at risk than others. Domicile is a complicated concept which is relevant to several aspects of life – including taxation. Unfortunately, HMRC officers often misunderstand the issues and domicile enquiries balloon into intrusive and unwieldy exercises in data-gathering – usually with the justification that the responses sought all add ‘context’. It is crucial to keep HMRC focussed on the real issues and to seek to limit the scope of the enquiry to the relevant points. Experience of the legal and practical considerations is essential and affected taxpayers will inevitably need early advice.
Case study
Each year, HMRC select a number of individuals or businesses at random for a compliance check. In all but the most straightforward cases, taxpayers selected for a check should quickly seek legal advice. It is usually prudent to assume that you have been deliberately selected rather than chosen at random. HMRC investigations can be time-consuming and stressful and it often helps to have a professional on your side to deal with the Revenue. Experience shows that HMRC does not always act within its powers and an experienced solicitor can frequently narrow the scope of the enquiry – and reduce any potential tax liability.
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