Enquiry Meeting:One Big Interview

According to the HMRC, during a tax investigation, meetings between the taxpayer and the tax inspector play a vital role.

Why is that? Because according to HMRC, this is the easiest way to obtain information about the taxpayer's business and settle the enquiry faster.

Also, meetings between the taxpayer and the tax inspector ''ensure that, where omissions have been found, the taxpayer is aware what offence has been committed and the likelihood of penalties and of the benefits of co-operating in bringing about an appropriate settlement at the earliest possible date, but you should make it clear that it is entirely a matter for them to decide.''(Enquiry Manual, HMRC)

When dealing with a meeting with the taxpayer, the inspectors are advised to consider a few points :
•the purpose of the meeting,
•the reason of the meeting,
•list of questions to be answered by the taxpayer
•review of all the information held,
•establish the basis of settlement.

The Inspectors Enquiry Manual (EM1822) tells the Inspector that the meetings enable them to:
''•obtain facts from the taxpayer about the business, how it is run and the records that are kept;
obtain the facts in non-business enquiries;
•explain the purpose of your enquiry. Taxpayers may not always be fully aware of the extent of HMRC enquiries;
•establish whether the taxpayer wishes to disclose omissions;
•agree what action is required and by whom to move the enquiry towards conclusion;
•ensure that, where omissions have been found, the taxpayer is aware what offence has been committed and the likelihood of penalties and of the benefits of co-operating in bringing about an appropriate settlement at the earliest possible date, but you should make it clear that it is entirely a matter for them to decide.
•quantify and agree omissions;
•settle the enquiry.''(Enquiry Manual, HMRC)

What you need to realise when dealing with a tax investigation is that there is no legal obligation for you to attend a meeting/interview with the Inspector.
Also it is important to go through the structure of the meeting in advance with your tax agent.
It is vital while attending such a meeting to have appropriate representation.
Tax Investigations and conflicts with the HMRC can create difficult and stressful times for anyone involved as well as a big accountancy bill.
Here at Taxfile we have free-of-charge enquiry protection cover. The insurance will cover the whole costs involved in dealing with your tax investigation. For more details about our insurance policy come and see us in our office in Tulse Hill or Exeter.

Tax Enquiries: Guilty Until Proven Innocent!

An enquiry is defined as seeking information, asking, questioning. Self Assessment is a process now/check later regime. According to HMRC,enquiries encompass all work carried out to check returns after processing - from a single enquiry about one entry in a return to a detailed examination of all the taxpayer’s affairs.
Under Self Assessment, taxpayers have clearly defined obligations while HMRC has defined powers in order to make sure that all taxpayers meet such obligations.
There are two types of tax enquiries:
•full enquiries (covering every single aspect of the return) and
•aspect enquiries(dealing with only one or more aspects of the return).
According to HMRC, a full enquiry is one which seeks to address all the significant risks of error in the return, including the risk of the return being fundamentally incorrect whereas aspect enquiries are those which fall short of a full, in-depth examination of the whole return but instead concentrate on one or more aspects of it.
Aspect enquiries, although more limited in scope than full enquiries, should not be seen as any less thorough or investigative.
If no enquiry is made within the allowed period (one year from the day the tax return is received by HMRC, for specific examples follow this link), the return becomes final unless the tax office makes a discovery assessment as a result of the return being incorrect or there was fraudulent or negligent conduct in making the return.
A very small proportion of returns will be taken up for enquiry on an entirely random basis. Most of the enquiries may start because either the return was sent in late, or some figures in the tax return did not match their records or just HMRC received a tip off.
All taxpayers should be aware that there is a chance of their returns being subject to enquiry.
Where a tax return has been selected for full enquiry, the enquiry officer aims to identify and examine all the significant risks of error in the return, including the risk that it is fundamentally incorrect. Also, where the business records do not prove to be as accurate as they should be, the officer in charge will need to look at the private side.
In order to make sure that there is no undisclosed source of income or additional cash coming from somewhere which was not taxed, the enquiry officer uses three main techniques:
•Cash Flow Tests involved with an analysis of drawings;
•means tests which determines the amount of money that is available to a taxpayer for living expenses.
•capital statements dealing with a detailed accumulation of information about capital worth, income of all sorts and expenditure.
Individuals with complex tax affairs investigated by HMRC should seek early help from a professional advisor to guide them through every step of the enquiry from responding to the officer, arranging a meeting to negotiating a settlement.
Taxfile's tax agents in South London and Exeter will guide you through this process and try to save you tax, interest and penalties.
Taxfile is happy to announce that we have recently renewed our free-of-charge enquiry protection cover. The insurance will cover the whole costs involved in dealing with your tax investigation so you can give you piece of mind and save you hundreds of pounds at the same time.
So pop in to see us and make the best of it!

Tax at Christmas time!

A very Merry Christmas to one and all from Taxfile' s Tax Accountants.

Our gift to you all this year is a brand new, free of charge insurance cover.
This cover will provide you with protection against any possible Tax enquiry: In the unlikely event of a random investigation by the revenue, Taxfile have insured its customers against the associated costs incurred in defending such cases thus saving its clients hundreds of pounds. So avoid the stress and have piece of mind this Christmas and call into Taxfile this December.
By way of an extra incentive to think Tax returns before the end of December! Taxfile have also put together some great Christmas prizes.
Bring your details into us before the 31 December and you'll have a free entry into our Christmas draw.

Prizes available are:

• 1st Prize: A weekend for two at one of the Meridian Hotels
• 2nd Prize: Half a case of champagne
• 3rd Prize: A Marks and Spencer voucher worth £25.00

So let Taxfile take the pressure off, come in and see us before the 31st of December and ensure you have your return filed before the January 31st deadline.

Furthermore Taxfile have now established links with companies offering financial, legal and mortgage advice, further details on these services are outlined in our newsletter which will be arriving on your door step very shortly.

We look forward to seeing you soon.

Taxfile knows everything about taxi drivers' tax!

There are a few things that need to be considered when it comes to taxi drivers' tax. Among them we can mention the following:

•Mileage Allowances
Taxi drivers can claim as an alternative to vehicle running costs mileage allowances of 40p for the first 10,000 miles and 25p per mile thereafter. You may not claim mileage allowance and vehicle running costs. Should you choose to claim the mileage allowance then keep good records of mileage covered, purpose of journey.

•Taxi Capital Allowances
If you bought a vehicle in 2005-06 and used it as a taxi you can claim a first year tax allowance of 40% of the cost of the taxi, restricted to £3,000 for vehicles costing over £12,000. On vehicles purchased in previous tax years you can claim 25% writing down allowance on the balance not yet claimed. If you have bought and sold a vehicle used as a taxi during the financial year the tax allowance is restricted to any loss made on resale and any profit made over the written down value is taxable as a balancing charge. First year allowance in the current tax year 2006-07 is 50%.

• Taxis bought on Hire Purchase
Claim capital allowances on the original cost of the vehicle, interest and other charges count as business expenses and go in the self assessment tax return.

•Taxi Running Costs
When completing the self assessment tax return taxi drivers should enter fuel costs as cost of sales not motoring expenses. Do not claim fuel expenses when you are on holiday, the revenue will check should they inquire into your self assessment tax return.Taxi running costs also include repairs, servicing and parts including tyres, road tax, taxi insurance and AA/RAC membership. Include radio hire and taxi office costs in general administrative expenses.

• Household expenses
If you run your taxi business from home you can claim a proportion of household expenses as business expenses. Household expenses are likely to be disallowed unless they are either specific to the business or a specific area of your home is devoted entirely to your business.

• Spouse Costs
You can claim expenses for partners who work for your taxi business and payments up to £94 would not attract income tax or national insurance however any payments claimed must be real payments for real work done. The Revenue naturally adopt a strict view on expenses claimed for partner work as it is an area some people might use to reduce the tax liability.

•Other Expenses
The best method of ensuring the taxi drivers tax bill is as low as possible in the future is undoubtedly to meticulously maintain good records of all taxi receipts and expenses and mileage covered which offers the opportunity for taxi drivers to compare vehicle running costs against mileage allowances and choose the most tax efficient option. General if the taxi cab capital allowances are high vehicle running costs will be the best option and if taxi cab capital allowances are low then mileage allowances may well legally increase the costs you can claim and save you money.

Taxfile in South London and Exeter taxi and cab drivers choose the best accounting option in order to reduce their tax liability.
Taxfile can also provide you with a record-keeper to fill in with all your takings and your expenses for the year. For more information, you can visit us on http://www.taxfile.co.uk/.

Welcome to the Inheritance Tax Blog

Inheritance Tax (IHT) is a tax on the value of a person's estate on death and on certain gifts made by an individual during their lifetime.

There is a certain threshold when it comes to inheritance tax. This is defined as the amount above which inheritance tax becomes payable. If the estate, including any assets held in trust and gifts made within seven years of death, is less than the threshold, no inheritance tax will be due on it. Starting from April 2007 the threshold, also known as the nil-rate band is £300 000. For transfers on death, the value of an estate above the mentioned band is taxed at a rate of 40%. For lifetime transfers the tax rate is 20%.

There are a few things to consider when dealing with IHT:

• Gifts between husband and wife are generally exempt for IHT. It may be desirable to use the spouse exemption to transfer assets to ensure that both spouses can make full use of lifetime exemptions, the nil rate band and the potentially exempt transfers (PETs). With a PET the gift will be exempt from IHT if the donor survives for seven years.
• Gifts to individuals not exceeding £250 in total per tax year per recipient are exempt. The exemption cannot be used to cover part of a larger gift.
• £3,000 per annum may be given by an individual without an IHT charge. An annual exemption may be carried forward to the next year but not thereafter.
• Gifts in consideration of marriage are exempt up to £5,000 if made by a parent with lower limits for other donors.
• Gifts to registered charities are exempt provided that the gift becomes the property of the charity or is held for charitable purposes.
• Trusts can provide an effective means of transferring assets out of an estate whilst still allowing the donor to retain some control over the assets. Provided that the donor does not obtain any benefit or enjoyment from the trust, the property is removed from the estate.

A good planning is essential when dealing with Inheritance Tax. Any plan must take into account your personal circumstances and aspirations. Taxfile in South London and Devon can help you find the best solution to minimize your tax liability.

Tax Enquiry Nightmare Gets Worse

If you are unlucky enough to be the subject of a tax enquiry by the tax man, it could now be an even worse nightmare for you than ever before. HMRC has recently introduced a new bonus scheme for the tax inspectors who conduct the enquiries, which means they have a vested interest in coming down hard on ordinary folk and negotiating far less. The more tax they find you need to pay - in their opinion - the more they will earn.

The average extra tax they are demanding in recent enquiries now averages a worrying £7,778 for each self-assessment enquiry it undertakes - that's a steep jump of £3,251 extra on last year's average. The new statistics also show that the amount of extra tax generated just from the band of those earning more than £200k per year has risen to £197 million which is a 150% increase on the preceding year. Clearly those bonuses are having the desired affect on the individual tax inspectors who appear to be squeezing every last penny from each of the enquiries they are undertaking.

It's times like these when services of tax advisers like TaxFile really come into their own. Because they know the rules (and any allowable expenses) as well as the tax inspectors do, they level the playing field for ordinary hard-working people and can argue the case on your behalf. For a low fixed fee the whole headache can be taken over by an accounting professional who is on your side. Taxfile have offices in South London and in Exeter, Devon. Telephone 0208 761 8000 for further information.