Discovery assessments are issued by HMRC inspectors to charge individuals and companies for lost tax. They have generated a huge volume of caselaw and the latest case looked at:
1) What constitutes a deliberate inaccuracy by the taxpayer? This matters because a deliberate loss of tax gives HMRC much longer to raise a discovery assessment. Broadly, the Supreme Court decided that only an intention to mislead counts and where an inaccurate entry is explained elsewhere in the document (a so called white space disclosure), there won't have been a deliberate inaccuracy.
2) Can a discovery assessment become stale if HMRC don't act quickly enough? The Supreme Court held not: despite a recent trend in the cases supporting this type of argument, the Supreme Court decided that, provided the statutory time limits are complied with, there is no additional requirement to act promptly.
HMRC has the power to issue a notice requiring the provision of documents or information from a taxpayer or third party and there can be penalties for non-compliance (although sometimes a pre-cursor notice is issued instead and less formality is required). It will be key to understand which documents are relevant and reasonably required in order to check the tax position.
In this podcast we give examples of what that means in practice and look at time limits, what to do if you suspect HMRC are conducting a "fishing expedition" and some useful tips on strategy.
IR35 is designed to prevent tax avoidance where a "personal service company", owned by an individual who is still working in a manner akin to a traditional "employee", provides professional services to clients. In the past, the company was responsible for paying any tax due on the basis that the payment to the worker was an employment payment. However, under new rules coming into force next month, the burden of applying the rules and paying any tax will now be pushed down the supply chain.
In most cases, that will mean that it will be the end-user who will have to determine worker status and collect tax. Particular issues arise where a worker is working both inside and outside of the UK and for umbrella companies. These issues are discussed further in the podcast, together with a look at how income tax and NIC will be collected.
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