- This topic has 1 reply, 1 voice, and was last updated 15th April 2018 at 9:11 am by
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I am currently looking at a scheme involving an option that I believe Patrick has opined on positively. What worries me is that this scheme is deemed not to be discloseable. The firm proposing the scheme intends to send a letter to the Complex Transaction Unit of the HMRC explaining it in detail.
However, if I was the HMRC I wouldn’t want to necessarily challange a scheme in the first 9 months anyway because by now they must know that clients of those schemes have fee insurance in place for the first 9 months only (and legal support). After the 9 months the members of the schemes are a lot more vulnerable to HMRC attack.
So my question is: What is the best method to ensure that after 9 months the case is properly closed and no justification for a discovery assessment remains?
Kai, as long as a return has been filed and a suitable disclosure letter has been submitted then HMRC only have the nine month enquiry window to initiate an enquiry, The disclosure will prevent a subsequent discovery assessment in the four year period following the transaction. Hence the insurance being limited to enquiries commenced in the initial nine month period. The drafting of the disclosure letter will be important and requires care and attention to detail. I am sometimes surprised at how even leading firms seem to develop a blind spot when drafting what should be a clearly worded letter focussed on the potential insufficiency of tax. I listened to some one from one of the Big Four recently saying how they couldn’t understand how you could draw HMRC’s attention to an insufficiency of tax paid in the disclosure letter but also file the return saying no tax was due. There is actually no difficulty at all. This is because the technical basis for the position adopted in the tax return that no tax is payable will be explained in the letter. This is then followed by an explanation of the possible potential counter-arguments which might lead to HMRC disagreeing with the return and concluding that tax was payable. The letter will say that while HMRC may decide on the basis of the counter arguments that insufficient tax has been paid the taxpayer has nevertheless been advised that on balance the position it has adopted is the correct one and that HMRC may decide if they wish to enquire into the transaction. The taxpayer has therefore expalined its filing position but at the same time has drawn HMRC’s attention to any counter arguments but said that on balance it believes that the position adopted in the return is the correct one so there is actually no inconsistency between the return and the disclosure letter.
