Adviser insights: Q&A with Doug Sinclair – Tax investigations and tax disclosures expert

How long have you been a tax adviser Doug?
I have been working in tax for over 30 years.

Doug Sinclair

How did you come to specialise in tax investigations and tax disclosures?
I started my career in tax on 13 July 1987 at my local tax office in Bromley as a filing clerk. Coincidentally a few years later another member of the Tax Advice Network, Bill Stevenson became the District Inspector. I ended my career with HMRC in February 2001 to join the profession and since then have acted for clients who are either under investigation or who wish to make a disclosure.

What are the most common mistakes you see made by non-specialists in your area of tax?
The most common misunderstandings that I see relate to providing every document that HMRC has requested. Whilst this may be correct, when I ask a non-specialist why they provided a particular document, they often say because HMRC asked for it. HMRC will often use the premise “if you don’t ask, you don’t get.” Another issue I see is where non-specialists do not understand the concept of deliberate behaviour and the non-tax issues which are associated with it.
What are the most valuable issues on which you have given advice?
Category of behaviour – there are so many issues it can affect from time limits, penalties and non-tax issues (naming & shaming, monitoring of tax returns etc.).
What differences might you expect to see in the coming year that could impact those issues?
I suspect HMRC will continue to assert deliberate behaviour on a range of matters, as the Treasury will need to collect vast sums of monies.
What has been your worst experience with HMRC?
I couldn’t possibly comment……. but speed of response to certain disclosures has been an issue.
What has been the most rewarding thing you have done from a tax perspective?
The field of investigations and disclosures often result in a very close bond between advisor and client and it is pleasing to assist in saving a business from being wound up or saving a family relationship from dealing with the delicate financial issues which have arisen.
What is your top tax tip for general practitioners?
Don’t jump in to a client problem without sitting back and reflecting. If it’s outside your comfort zone, don’t be afraid to ask someone who has expertise in the subject – the client will thank you in the long run.
If you hadn’t gone into tax what would you like to be doing now?
When I was younger I played rugby for Anglo Scots U21’s and wished I had gone into a sports professional role, possibly a coach.
What do you enjoy doing in your spare time – away from the world of tax?
Relaxing over good food and fine wine, which is now enjoyed at home.

New service: Find A Tax Inspector

[Sorry but this was just an April Fool shared on 1 April 2021]

We have expanded our service offering. The Tax Advice Network now enables accountants to Find A Tax Inspector (FATI).

Using FATI means you can get directly in touch with the person you need at HMRC whether by phone, email or web chat.

Until now you would struggle if you wanted to reach someone specific. Your starting

point might be the main HMRC contact page on the web.

This currently lists 139 different contact facilities and options. These range from ‘Agent dedicated’ phone lines (at the start of the alphabet) through to the ‘Wealthy team’ at the end.

To create the new FATI we’ve used leaked HMRC internal records to identify the best phone numbers, web chat links and direct email addresses for all HMRC compliance managers, and subject matter experts.

And if you add in a taxpayer’s UTR or a business tax ref to your search you will be able to reach the official responsible for the case.

This is similar to the way our long established Find A Tax Adviser website works, where you can  find tax advisers by reference to specialist topics but can also add in your postcode to find which tax advisers are based closest to you.

You can use the FATI facility via our website here:

Unreliable HMRC guidance

How reliable is HMRC guidance for agencies as regards the new IR35 changes that take effect from next month (April 6th)? “Not very” it would seem.

We are indebted to one of the longest standing members of our Network, David Kirk, for his analysis of HMRC’s webinar on 5th March 2021.

David, who is widely acknowledged as an expert in the context of IR35, was aghast at the amount of misleading information in the webinar.

It was aimed at ‘fee-payers’ – those normally responsible for operating PAYE and deducting and paying over National Insurance contributions, which will typically be agencies.

David’s analysis lists 25 errors in the webinar and the subsequent Q&A. In each case he explains the problem and provides clarification and/or the correct answer.

Here’s just one example:

At 23:06. ‘Once the client has decided whether or not the rules do apply, they must set out that decision in a status determination statement, or SDS.’ Wrong. There is no legal requirement for this, and where the client pays the intermediary directly there are no legal consequences for failure to do so.

If this is something you need to know more about then please contact David directly through his profile here >>>>

“Give me pure tax evasion any day”

This sentiment was expressed by one of our tax investigation specialist members on the Tax Advice Network’s private forum for members. What prompted such an intriguing comment?

The discussion related to aggressive tax avoidance schemes. I’m no fan and have long sought to highlight that the real risks of such schemes are generally greater than the promoters would have you believe. This is especially the case if you are dealing with promoters who are one or more steps removed from the tax brains that originated the scheme.

The tax adviser members of the Network were sharing their views as to the complexity of such schemes. This was in response to my suggestion that we consider adding the following as additional headings on our list of ‘specialisations’:

Avoidance schemes and strategies – resolving challenges

Sadly there are plenty of taxpayers and accountants who have been taken in by the hard sell and ‘assurances’ offered by promoters of tax avoidance schemes. It’s a fact of life that the problems only become apparent some years after the initial transactions took place. Our advisers are experienced in negotiating with HMRC and helping clients to extricate themselves from complex structures that have little commercial value.

Explanations and advice

Unlike the aggressive purveyors of tax avoidance schemes who focus on promoting and selling their ‘products’ our advisers prefer to focus on bespoke tax planning. Some of our specialists are well aware of the ‘solutions’ being promoted to reduce income taxes, capital gains tax, corporation tax, SDLT, NICs VAT and IHT. Whilst the tax reduction is often attractive, many clients decide not to proceed once they understand the risks (and there are always risks). Others may still be willing to proceed but only when fully aware of the risks and downsides they may face.

Call or email one of our specialist advisers if you want help in resisting a hard sell or a more down to earth explanation of a specific strategy, the risks and probable outcome.

Despite the potential interest in such generic services, we concluded that we could not offer to provide them in the way I had initially suggested. To do so would require specific members to have in depth knowledge across a wide range of specialist area of tax and the related avoidance schemes.

In practice most advisers only have such expertise in their own specialist area or areas. So, for example, one member noted that he would be willing to assist anyone who is involved with an employee loan scheme. However he would be reluctant to offer advice on non-employment related schemes as to do so would require a great deal of uneconomic research.

Another member of the Tax Advice Network noted that he has been instructed on a number of occasions after HMRC had successfully challenged schemes. He noted that it often only takes a little research to find:

“the little bit of writing – in the mass of over information – that covered the seller’s back and usually points to the naive customer not reading the blurb with enough detail to spot that they were likely to end up paying through the nose for very little.”

And another member noted that one of his past roles in a national firm of accountants was to unpick these avoidance schemes, with the result that very very few were sanctioned by the firm.

It became clear from our online discussion that there was no appetite for providing the two generic services I summarised above. Indeed, such is the lack of enthusiasm for such schemes among these experienced specialist tax advisers that one (a tax investigations specialist) was moved to conclude: “Give me pure tax evasion any day”.

Tax & Accounting Platform of the Year 2020

We are more than thrilled to announce that the Tax Advice Network has been chosen as Tax & Accounting Platform of the Year 2020.

What a year to win an award! Not only was 2020 the year of COVID and Lockdowns, but we also celebrated our 13th anniversary, and continued our managed growth over this period.

We are so excited to have won this award and really thank the judges of the SME News Finance Awards for their hard work and very welcome decision.

In the announcement message we learned that we did not win simply by popularity of votes, but because of our contributions to the industry and sector.

Dedicated researchers prepared a case file on our behalf, via merit-orientated research into public domain sources.

“Awardees must be able to demonstrate expertise within their given field, dedication to client service and satisfaction, and commitment to excellence and quality”.

2020 was certainly the year for that!

The Tax Advice Network, which also operates as now has more vetted tax advisers, as well as more local tax accountants, registered on the site than ever before.

We are so pleased to celebrate this win and award!

Selling services into the EU

UK businesses who sell digital or broadcasting services to non-business customers in the EU will be used to completing an EU VAT MOSS return by 20th of the month following the end of the calendar quarter. Those with small volumes of cross-border digital sales could avoid VAT MOSS returns altogether if their annual sales fell under the de-minimis threshold of £8,818.

Now that the UK is no longer treated as a member of the EU, as the Brexit transition period has ended, UK businesses are not eligible to use the EU VAT MOSS system. Those UK businesses who continue to sell digital services to non-businesses customers in the EU must use the non-EU VAT MOSS scheme, for which there is no de-minimis sales threshold.

To register for non-EU VAT MOSS the trader must first have an EU VAT number, and UK VAT numbers don’t qualify. The trader must register for VAT in an EU country, and this may require appointing a local tax agent.

The UK trader should register for non-EU VAT MOSS by 10th of the month following the month in which the first digital services sale is made to a non-business customer within the EU. If such a sale is made in January 2021 the UK trader needs to register for non-EU VAT MOSS by 10 February 2021.

The alternative to registering for non-EU VAT MOSS in one EU country, is to register for VAT in each EU country where the business supplies broadcasting or digital services.

Late filing penalties

“No fine for late taxes” was the misleading front page headline In The Sunday Times on 10 January 2021.

The report doesn’t include a source but it would seem to be a letter that was sent by Jim Harra, CEO of HMRC, to 6 accounting bodies on 18 December 2020. We featured this is our weekly topical tax tips on 7 January.

That letter includes caveats clearly intended to avoid exactly the type of headline that appears in The Sunday Times. Specifically it says: “We do not want to complicate this message by sending a blanket signal that it’s OK to file late”.

The Sunday Times article also seems to confuse penalties for late filed tax returns and late paid taxes.

Our advice to accountants last week, before the ST article appeared:

The 2019/20 tax return filing deadline remains at midnight on Sunday 31 January, and automatic £100 late filing penalties will be issued by the HMRC computer for any tax returns received after that point.

However, all penalties can be appealed. HMRC has confirmed, in a letter to the professional accounting bodies, that the period in which an appeal will be accepted has been extended to 90 days. That appeal period runs from the date the penalty notice is issued, not from the date it arrives with the taxpayer.

All taxpayers who have accessed their online Personal Tax Account (PTA) will have consented to receiving all communications about self-assessment from HMRC in digital form, so don’t expect a paper penalty notice to always arrive in the post. You will need to prompt your client to look for penalty notices from HMRC on their PTA.

Taxpayers can appeal against a penalty notice using the online service, by logging into their Government gateway, but tax agents need to appeal using the paper form (SA 370).

In order to appeal successfully you need to include a reasonable excuse to why the tax return was late. This reasonable excuse needs to be in place for the period in which return should have been submitted and the delay after the submission deadline. HMRC expect the return to be submitted as soon as the factors that contributed to the delay have dissipated.

HMRC is prepared to accept covid-related personal or business disruption as a reasonable excuse, and this will include disruption to the tax agent’s work as a result of the pandemic.


Christmas party exemptions

Office parties will have to be online this year because of the coronavirus restrictions that apply across most of the country. But employers can still say “thank you” to their employees with a physical gift.

HMRC has confirmed that the cost of online staff parties will be an “annual event” for employers qualifying for the tax-free limit of £150 per person. Remember this is an absolute cap not an allowance, and if the cap is breached the whole amount is taxable and subject to NIC.

The £150 per head limit applies to all those attending the event, not just employees. It should cover the cost (including VAT) of food, drink and any entertainment provided. The employer could send a food hamper to every employee to enjoy while attending the online party, and provide a form of entertainment such as a live comedian, music or a quiz, all delivered online of-course.

In addition to, or instead of the online staff party, the employer can give a physical gift worth no more than £50 to any or all of the employees. These trivial benefits must not be provided in return for the employee’s normal service, and must not be a contractual entitlement. Also, the gift must not be cash or a cash voucher.

For employees who are not the company’s directors or their family members, there is no limit to the number of trivial benefits the employer can give during the year. A gift-card that is topped up at intervals with £50 each time would fail this test as the total value given in the year would be counted as one gift.

Directors have an annual cap of £300 for trivial benefits, which also applies to members of their family or household.

Autumn tax announcements

There will be no Autumn Budget this year, but that doesn’t mean tax policy has paused, changes are still being made in the following areas:

MTD for corporation tax
We have been waiting for an indication of when the MTD rules will apply to companies, and now we know those rules won’t be compulsory until 2026 at the earliest.

However, the MTD regime will apply to all organisations that pay corporation tax; there will be no minimum turnover threshold as applies for income tax. There will be quarterly reporting of income and expenses, and a pilot to test the software will commence in 2024. HMRC will not provide free software for filing the corporation tax returns required under MTD.

Capital allowances
The annual investment allowance (AIA) cap is currently £1 million, and was due to reduce to £200,000 on 1 January 2021. This £1 million cap will now be extended to 31 December 2021.

R&D tax credits
There is currently no cap on the amount of R&D payable tax credit a small company can receive if their company has made a loss after deduction of their R&D claim. This will change for claim periods starting on and after 1 April 2021. The payable tax credit will be capped at three times the PAYE and NIC payable for the period plus £20,000. You need to factor this into cash flow forecasts for your clients.

CIS changes
The construction industry is facing a triple whammy of tax changes in 2021: VAT domestic reverse charge on 1 March, off-payroll and CIS reforms on 6 April.

The later changes may affect sub-contractor companies who claim their tax refund through RTI, and large businesses who could be classified as deemed contractors as they undertake more than £3 million of construction expenditure within 12 months.

There will also be new penalties for supplying false information to HMRC when applying for gross payment status or CIS registered status. This penalty will have a wide scope as it can be applied to any person who influences another to provide false information.

How to tell if you’ve paid too much Stamp Duty 

Stamp Duty Land Tax (or SDLT) has been big news lately, with the chancellor’s announcement in July of a ‘holiday’ on the tax for all properties of £500,000 or lower purchase price.

But what if you bought property at any price before July 2020? Can you be certain that you paid the right amount of Stamp Duty on your purchase? Might you be due a Stamp Duty Refund? And if so, how do you even go about getting one? 

There is no easy answer to the question of whether you may have overpaid your SDLT. With over 30 different exceptions and exemptions covering the type of property, its usage, the circumstances of the buyer and the nature of the purchase (to name a few), there is no one-size-fits-all equation that will instantly give the correct answer. 

Examples of factors which may prove relevant in the calculation of Stamp Duty on a property include: 

  • Land – if the property has land attached to it which is more than a simple garden. 
  • Mixed Usage – if the property has commercial buildings, agricultural land 
  • Annexes – many people fail to realise that a ‘granny annexe’ may qualify a property for relief under certain circumstances 
  • Any rights or interest over the land that do not benefit the dwelling itself i.e. commons rights to pass through over nearby parkland 

If your property has any of these elements, it is very possible that you will have overpaid your Stamp Duty Land Tax and may be due a refund. 

One well researched estimate* is that as many as one in five SDLT returns may be being incorrectly completed on property purchases, leading to millions of pounds of overpaid SDLT which HMRC will not proactively check. The only way to secure a refund of these overpaid monies is to approach HMRC with the correct assessment and seek an alteration of the original return based on the facts of the purchase. 

You may think that in order to make sure you didn’t overpay your SDLT, you simply need to call HMRC or your solicitor and double check with them. That’s where things start to get a little tricky. 

There are a number of reasons why solicitors are likely to make errors on many transactions, including relying on the HMRC calculator which doesn’t provide a 100% accurate picture on all properties. But solicitors also often simply don’t realise the actual complexity of SDLT as it stands. Because it shares a partial name with the old Stamp Duty, which was a broadly simple tax on the property itself rather than the individual, many of them assume it is the same.  

Additional problems arise from:

  • the proliferation of avoidance schemes set up in the early 2010s to take advantage of the increasingly labyrinthine legislation surrounding SDLT,; and
  • the aggressive stance taken on these by HMRC and the Solicitors Regulation Authorit.

Many accountants and solicitors are reluctant to make any more than the most cursory examination of the SDLT situation on any purchase, lest it result in unwelcome attention from their regulator. 

Calling HMRC introduces a whole other set of problems. HMRC helplines are not manned by people who are experts in SDLT. Or indeed law in general. Simple errors in basic understanding – such as confusing ‘civil partnerships’ with ‘common law partners’, can lead to disastrous errors. 

One must also remember that in order to assess a purchase for tax, HMRC will have relied on the SDLT return submitted to them, which itself will have been completed by the solicitor. HMRC itself has no knowledge of the property outside of what is provided on this form. Therefore, a purchaser calling them and asking if they are likely to have overpaid the SDLT on the property and be due a refund is only ever going to lead to the answer ‘no’. This is because HMRC will consider the property to have been correctly assessed based on the information they have. 

In order to firmly establish whether or not the SDLT on a purchase has been correctly assessed, you need a real SDLT expert to examine the details of the transaction – the type of property, the circumstances of the purchaser, the method of purchase, everything.  

They will then assess this against the full legislation relevant to the time of purchase, examining each of the various exemptions, exceptions and reliefs and ascertaining which, if any, apply. If any do. Then there must be a full report prepared along with an amended SDLT return, explaining exactly why the original assessment to SDLT was incorrect, what the actual position is, and what the amount of refund due should be.  

How do you tell if you’ve overpaid stamp duty? The same way you’d answer any specialist question – engage an expert and get them to give you the right answer.

David Hannah – SDLT expert. You can contact David via his profile here >>>>

*Research carried out by Cornerstone tax advisers.