HMRC seems to have got rather carried away with itself over calculating what an errant scaffolder (Matthew Hodges) owed it in fines and tax for undeclared VAT.
Hodges failed to declare (ie evaded) £11,000 in tax. However, HMRC accused him of evading £529,536 in VAT due on the scaffolding projects he carried out since 2006. On top of the unpaid tax, HMRC demanded £399,734 as a penalty for non-payment.
The onus of proof is of course is on the taxpayer to disprove whatever HMRC says it is owed, thus Hodges was in rather a bind.
Andrew Hubbard of Baker Tilly, is quoted by the Telegraph:
"It looks to be little more than a simple back-of-the-envelope calculation with no thought being given to the reality of how one person could have achieved a turnover of that level.Nichola Ross Martin, of Ross Martin Tax Consultancy, Mr Hodges' representative at the tribunal said:
These figures have stretched credulity to such a point that a court has to intervene and say that the tax officer hasn't used their best judgement."
This was "wholly unrealistic for such a one-man operation,"Judge John Brooks, of the tax tribunal, agreed.
There would not be sufficient days in the year to erect and dismantle enough scaffolding to achieve such a return."
He said:
"For Mr Hodges to have generated such additional turnover he would either have had double the amount charged to his customers or increased his work force."HMRC later admitted its own calculations of more than £500,000 in unpaid VAT were "unrefined".
Tax does have to be taxing.
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Absolutely disgusting. How on Earth could someone be so far off in their calculation, and how could it go out unchecked, and even reach as far as a Tribunal. Hang your heads in shame, those of you in HMRC that were responsible for this.
ReplyDeleteI've read the judgement and, despite all the zeros in the numbers, this seems like a bit of a non-story to me. Where a (non-)taxpayer isn't cooperating to HMRC's satisfaction, it's not uncommon to put out a deliberately unrealistically-high estimate to shock them into taking it seriously and providing information to arrive at a more realistic figure. Generally, this will lead to a more sensible discussion, in which the taxpayer accepts that they should have declared more liability and works with HMRC to agree how much.
ReplyDeleteDespite what Outraged of Baker Tilly implies, this tactic is nothing new. They've been doing it for years and, if anything, it's probably used less than it used to be.
In this case, the taxpayer has, entirely within his rights, decided to go to tribunal to argue that he didn't owe anything at all. (He lost.) It seems there was no agreement over the quantum, and it's entirely understandable that the taxpayer wouldn't want to agree an alternative figure before going to tribunal, given he was continuing to argue that the correct figure was £nil. As a result, it's fallen to the tribunal to decide the quantum, and it's telling that the HMRC officer was actually arguing at the tribunal for a much lower figure. (It's not surprising that the Torygraph omitted this important detail, but I'm surprised that the blog that's dedicated to HMRC employees didn't mention it...)
Anyway, for the Torygraph to imply, as it does, that this figure only came down because the matter went to court, is a nonsense.
Does that answer your question?
Stew G