We had our IVA approved in March. Shortly afterwards we got a letter from our local tax inspector who wanted to continue investigating our tax returns from years previous.Our previous dealings with the inspectors had been stressful and upsetting, they simply didn`t believe we had not been syphoning off undeclared profits even though we were up front about how much unsecured debt we had built up subsidising the business eg buying stock on credit cards.
So I rang the IP for advice. They advised me that the VAS office in Worthing - part of HMRC - would now be handling the case, but that it had a 6 month backlog. I then wrote to the tax inspector and told him this was the case, and left it at that.
Today out of the blue we got a letter from the inspector saying he`d finished the investigation and together we owed £9k tax from undeclared income!!! This is completely false - a bizarre accusation. How exactly does that work when we were building up so much debt? What an unusual way to enjoy ill gotten gains - our debit card transactions at Aldi and Netto must have had him rubbing his hands! Even if we had "raked off" £27k of shop takings where has it gone and what was it spent on? I wouldn`t care we supplied all our credit card and bank statements up front.
I think he might be looking (not very carefully) at one of our cards which was used every week to buy cash and carry stock up to around £8k a month, which would be paid off in full on time using mostly cash shop takings deposited through our personal account (thus avoiding bank charges for cash deposits in our business).
Meanwhile I am back in hospital for another 6 week stint on top of the other 8, having successfully grown more bugs in my infected tibia. Happy Days.
Anyway to get to the point has anyone any idea where we stand. Do we reopen dialogue with the local taxman or were we told correctly that the VAS would be taking over our case?
We phoned the IP and we posted them a copy of the letter this afternoon. They`ll get back to us next week but naturally we are confused and worried.
Any input gratefully received [:(!][:(!][:(!]
It is the role of your IP to agree all creditor claims - and they will want to see details of the claim before commenting further. Your input will be vital in agreeing a correct position with HMRC, but on the basis that your IVA has been approved, and unless you are going to be repaying your debts back in full, the impact of a higher claim is felt by your creditors and not you - however if the eventual claims figure exceeds 15% a variation meeting may be necessary to approve the increase.
If you are intent on fighting HMRC's position, you will need to put forward your side of the story supported by documentary evidence. Your IP is correct in thinking that VAS in Worthing deal with all personal insolvency cases, so maybe the message about your IVA has not yet reached the local office. Personally, I would now leave this to your IP to deal with - HMRC will have to justify their findings, and that will be the time for you to provide your input.
How annoying and stressful for you Hyperdrive!! Hopefully your IP can take this up with the tax man as Mel suggests and you can concentrate on your tibia (whatever that is!?!) and getting healthy and strong again. x
Hi, Mel is absolutely spot on about VAS in Worthing and as you have a Supervisor handling your financial affairs all you need to do is formally notify HMRC in writing, quote your IVA ref name and address of your IP and if you have details the name of your Supervisor. Send a copy of your letter to your IP and keep a copy for your own records. In all dealings in this matter put it in writing and keep all parties in the loop. After notifying HMRC you need not have further direct contact with HMRC and your stress levels should reduce, your IP will know how to take your dispute forward and as Mel says all you need do is provide documentary evidence when asked. Good luck hope it goes well....
It seems a bit silly for the local inspector to continue with an investigation into someone in an IVA. Firstly, the fact that you are in an IVA means the debt is bound anyway and an increase in the liability will only decrease the dividend and amount HMRC have to write off. As Melanie says it may even need a variation but that will not be until the final claim has been submitted and again if your final total debt exceeds the estimated statement of affairs by more than 10%.
Secondly, the fact that you are in an IVA tends to support your claim that you have not been syphoning funds off but if you did use money to repay debts this could lead to additional tax being owed. Hopefully Worthing will sort it out and you have nothing to worry about.
Last edited by Michael Peoples on Tue Jun 05, 2012 10:48 am, edited 1 time in total.
Hyperdrive, tax investigations usually find something - if only to justify the time spent. You are, however, being accused of tax evasion and , I think, should also speak to your accountant as well as your IP in view of the potential action the Revenue could take.
As soon as Worthing get a grip of this file, I am sure that the investigation will stop. HMRC simply don't have the resources to continue with issues like this right now, and it seems to me that you are suffering at the hands of an over-zealous local inspector. It is likely that it will go away, as the chaps at Worthing will likely make an assessment based on the returns that you have submitted.
Hyperdrive, I hope the'chaps' at Worthing - which must be the kindest thing they've ever been called - live up to Melanie's expectation. Maybe they will, but as I understand it the investigation has already concluded and I do think - particularly in the present climate - it's only sensible to cover all the bases and speak to your accountant as well. The inspector has concluded an investigation and is accusing you of a criminal offence I think you should treat that seriously.
Tiger. I think you are being a tad overdramatic in that the inspector is accusing Hyperdrive of a criminal offence. It can also be a genuine error not to declare all income and if there was clear evidence of fraud HMRC would be entitled to issue criminal proceedings.
If Hyperdrive wants to continue with this he has a number of avenues to pursue but there is a danger in running up expensive accountancy bills over a debt that is quite possibly irrelevant and perhaps is due. I have seen numerous clients offset debt repayments against profits and underdeclaring their profits accordingly. This is incorrect but the client does not realise this and is of the assumption that debt repayments are an allowable deduction.
I would leave it to Worthing but if Hyperdrive is convinced he is being unfairly treated he could take his case further but be wary of running up a huge post IVA accountancy bill.
Michael, You're quite right. We've not seen the inspector's letter and it may be he's treating the underdeclared position - as he sees it - as an error. All I'm really suggesting is that he should keep his accountant in the loop on this given the potential consequences. I'm sure Hyperdrive will make up his own mind in the light of how the investigation was conducted and what's been said in the correspondence to date as to whether that might be a good idea. I don't know why Melanie sees that as patronising. The questioner has been through a tax investigation and an IVA application and I would suggest needs people responding to focus on the question rather than each other.
Tiger - while respecting your right not to be moderated and to post in any style you wish, you do have a supercilious tone and cannot expect everyone to like it particularly when you direct comments implying poor advice has been given. Mel is respected on here and her expertise as an IP is well known, you on the other hand dodge questions about how yu derive your expertise but post with an authoritative tone.
