Contact was made with Gilbert Tax as an individual had received a letter from HMRC suggesting that they may have undeclared offshore income and suggesting that the tax affairs be reviewed and if there was undeclared offshore income that the individual took part in the Worldwide Disclosure Facility.
Having had a detailed discussion with the individual it was clear that this was a complicated case involving a number of years and both offshore and onshore errors. It was established that the individual did not know there were errors until the individual reviewed the tax returns following receipt of the letter.
In the interim we notified HMRC that Gilbert Tax were acting on this matter and as is Gilbert Tax’s standard practice, put HMRC on notice that we would be writing a detailed letter which would be sent with various supporting documents to enable HMRC to understand the disclose made online as this only allows figures of income, tax, interest and penalties to be shown on the form without any explanation.
We were engaged to deal with matters and the client decided he wanted to calculate the tax interest and penalties and then use this as the basis for Gilbert Tax to make a review and undertake the disclosure. The comprehensive spreadsheet was sent and the total liability per the client’s spreadsheet was over £103,000.
Our client had assumed that all of the errors in all years could be subject to tax and that as all of his income was from overseas sources (most of which had been declared in the UK) that errors relating to the expenses would be an error with regards to offshore matters and therefore that the penalty would be 150% for all years.
Using the experience of dealing with hundreds of Worldwide Disclosure Facility and of the rules relating to penalties and the years that HMRC can assess it was demonstrated that for some years HMRC could not ask for the tax as they had no power to assess it and also that the errors in the expenditure were not an offshore matter and therefore would only incur penalties of 20%.
In addition there were some expenditure which the client did not realise he could claim and that could be claimed as part of participation in the Worldwide Disclosure Facility.
A detailed letter was sent to HMRC putting forward all of the relevant technical points and explaining the errors in detail and how they had occurred, along with sending basic information like tax computations.
HMRC agreed with Gilbert Tax’s conclusions and the final amount paid to HMRC was approximately £12,750. As the final bill was significantly below what the client expected to pay he decided to make significant payments to various charities.
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