This case involves an MOT Centre and garage repair business, in a small cashier town, run by a sole proprietor and his three employees. Following a tax visit and an inspection re some recent figures, spanning over a three-month period, the tax inspector concluded that there was a supersession of sales to the tune of £19K plus. Under HMRC’s Enquiry Manual [EM2012], the officer proposed to extrapolate this figure to obtain twelve months suppression, scaled back by reference to the RPI [Retail Price Index], over five years trading.
Although admitting to an element of irregularity, the owner of the MOT Centre was horrified and distressed at the arbitrary way that the officer had made her conclusions. He therefore resolved to contact a well-known accountancy firm- Gow and Partners Ltd- for assistance. Gow at Partners Ltd are specialists in undertaking tax enquiry cases, and their analysis soon confirmed the suspicion that HMRC had vastly exaggerated the extent of any wrongdoing.
After much correspondence and the gathering of evidence including personal affidavits of some customers to support schedules of the acknowledged infringes, the overall additions to profits over five years was agreed at £30K [tax £106K]. The principle of scale back was challenged for the first three years of trading and accepted by HMRC as valid in this instance. The whole process took four years to complete, and the delay was not helped by the coronavirus pandemic. However, the trader in question continued to operate during his long ordeal and is now running a thriving business.
The tax saved was £102K.
The key takeaway today is that HMRC are not infallible. If you know, or even just suspect, that you have/ are going to suffer the consequences of HMRC misconduct, then please contact us for a discussion- even if this is merely to put your mind at ease! Call us on 01254 589799, or send us an email at firstname.lastname@example.org.