Architectural firm

HMRC began an enquiry into a firm of architects  by requesting a formal visit.

The company’s payroll, including the treatment of expenses and benefits, was checked initially. The first concern raised was into the nature of the mileage and whether it was all business related. HMRC noted it was  not always clear what the purpose of the journeys undertaken by the employees was or the routes which had been taken. By offering HMRC access to job files, it was possible to demonstrate and justify the sample journeys but, nevertheless, it was agreed to amend all future forms to prove better information.

HMRC also inquired about the directors’ expenses, as company credit cards were often used for entertainment purposes such as evening meals. However it was possible to demonstrate that the expenses related to specific jobs.

No material discrepancies were uncovered within  the client’s operation of payroll or benefits and the enquiry was closed in less than 12 months. Nonetheless, professional fees approaching £2,500 were incurred putting up the successful defence.

HMRC may attempt to expand the scope of their enquiry, or request information that they are not entitled to.

Property rental business

A property rental business was selected for enquiry,  which ultimately involved the submission of copious information. Despite a minor adjustment for disallowable expenses, no additional corporation tax was due.

The sting in the tail was how the enquiry branched out into the personal side of the client’s finances. This case proved particularly tricky as the client had many business interests from the past, partly involving the development of land.

Eventually, after protracted communication back and forth, HMRC backed down and accepted the arguments on losses to be carried forward. It cost over £4,500 of professional fees to present the case and protect the losses which reduced the final settlement.

John McAuslin

Tax Partner

John McAuslin

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Wendy Ramsay

Tax Investigations Senior Manager

Wendy Ramsay

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