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Code of Practice 8 Case Study

Code of Practice 8 Expert Advice

An individual was referred to us from a tax advisor we have helped before.

The individual and his family were not domicile in the UK but had been resident for a number of years.

Due to being an astute businessman in the country of birth the individual had purchased a nice house in London and HMRC were rightly asking how he could make such a purchase and live and support his family without income. HMRC suspected that the income earned overseas was being brought into the UK and that tax should have been paid on this income.

In addition to this, in one year our client had not been UK resident and it was an important point tax wise to establish this with HMRC.

Taking Control of the Process

We made contact with HMRC and suggested that as this was a complicated case we would need to work in sections and focus on one issue, get agreement on the issue in principle and then move to the next. HMRC had initially wanted us to send the information to them but this would just have resulted in many questions we would be better placed to control if we provided answers to what we thought the questions should be.

The client had kept impeccable records and using a combination of travel documents, credit and bank account statements, telephone records and passport stamps we were able to demonstrate to HMRC that for one year our client was not resident.

Working with our client we were able to demonstrate that none of the income sent to the UK was from income and that therefore tax was not due.

Handling HMRC Queries

As part of our client’s investments he has loaned money to an offshore company. HMRC threw many technical allegations at us trying to find some way to tax our client whilst never actually saying why they thought the many bits of legislation applied to our client.

Rather than bit and bat we agreed with our client that we would write a very detailed technical letter to HMRC explaining that their technical allegations held no water and did not apply to our client’s tax affairs. It was also agreed that to bring the matter to a close HMRC should assess and we would take the case to the Tribunal, which we were confident of winning, or HMRC should agree that there was no tax due.

What we did say is that we would no longer engage in any technical or other correspondence with HMRC on the matter as we did not believe they had a case and they had never actually put any technical arguments behind their allegations.

A few weeks after the letter was sent to HMRC they closed the case and agreed that no tax was due.

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Code of Practice 8 (COP8)
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