RISK REVIEWS

With HMRC’s current and widely-publicised public clamp-down on perceived tax avoidance, evasion and non-compliance, it has never been more important to ensure that your affairs are up-to-date.  Please see Rosalind Burns’ article on HMRC’s Paper “Tackling Tax Avoidance, Evasion and Non-Compliance” for further information.

There has been an unprecedented recent focus on tax in the media, with the “Panama Papers”, “Paradise Papers” and Starbucks, Apple and Amazon all regularly in the news in respect of their tax affairs.

The potential reputational damage is significant and HMRC are using all of their powers to ensure that they reserve the right to publish taxpayer details (and they often do publish them).

Similarly, with Banks and other institutions having clamped down on their client procedures in order to ensure they are seen to be whiter than white, you may find that it is more difficult to do business or to arrange your banking affairs in the most efficient manner.

It can, therefore, often be beneficial to have a professional undertake a review of your affairs to ensure that you are fully compliant before you approach any third parties.

If any irregularities are identified, these can often be dealt with quickly, efficiently and at minimal cost, enabling you to promptly continue with your day-to-day life with minimal disruption.  Avoiding the potential reputational risk can be invaluable.

UK Individual or Corporate

Individuals

UK structures: put simply, with the recent introduction of various beneficial registers then if you are an individual with a connection to any UK structures, HMRC will soon be aware of them (if they are not already).

Offshore structures: similarly, if you have structures based outside of the UK then, with CRS now in full swing and upwards of 100 countries now signed up to exchange information, HMRC will eventually become aware of them – this is becoming inevitable.

HMRC’s “Connect” database has been live since 2010 and contains an extraordinarily detailed network of information (more data than the British Library) with complex algorithms that can accurately detect discrepancies in an individual’s tax position.

For example, if you are linked to any structures, whether onshore or offshore, the Connect database will compare the position with your Self-Assessment Tax Returns and throw up a red flag for HMRC to investigate further.

We see many clients who received advice on how best to structure their affairs (on both a commercial and a tax basis) several years ago.  For many, this advice is now significantly out of date and may not be compliant with current UK tax rules.

It is always worth undertaking a periodic review of your position so that any irregularities can be identified and resolved before HMRC approach you.

This is especially true if you have undertaken any tax planning within the last 20 years – HMRC’s attitude towards activities which may previously have been considered “vanilla” is now shifting and the public interest is building.

We can review any planning undertaken, advise on how HMRC are likely to view it, whether it is still compliant with the spirit of the UK tax legislation and, where necessary, seek to unwind your position and regularise it going forward.

Where appropriate and of interest, our specialists can also discuss structures which may now suit your personal position better (for example, your children may now be older and you may wish for them to receive an income but not have access to the capital – trust structures are a simple way of protecting the capital whilst allowing the beneficiaries to receive an annual or ad-hoc income).

Corporates

If you are a corporate who is looking to undertake a significant transaction in the near future, whether or not you are seen to be historically fully compliant with the spirit of the UK tax legislation can often be the difference between the transaction going ahead or not.

This is especially true in light of the recent public focus on tax compliance.  For example, having an EBT on the Balance Sheet may well put off potential buyers.

  • If a risk review is undertaken with sufficient time before the proposed transaction occurs, often the potential irregularity can be resolved and there will be no further impact.
  • Alternatively, if an issue is not identified until nearer the time, it is still possible to review the proposed indemnities and warrantees to:
  1. Advise whether they adequately protect the buyer (where relevant), and
  2. Advise on the appropriate quantum

We often see proposed indemnities which are far in excess of what HMRC would realistically (or reasonably) seek to recover.  Again, this can be the difference between a transaction going ahead or falling through at the 11th hour.

Similarly, as detailed under “Individuals”  above, we can undertake a review of any historic planning, advise on how HMRC are likely to view it, whether it is still compliant with the spirit of the UK tax legislation and, where necessary, seek to unwind your position and regularise it going forward.


Offshore

With the introduction of “Requirement To Correct” (RTC) and with the “Failure To Correct” provisions coming in as of 1 October 2018, it has never been more important to ensure that your tax affairs are up-to-date.

Failure to do so could result in penalties of up to 300% of the potential lost revenue (minimum 100%), a potential 10% asset-based penalty and potential “naming and shaming”, whereby your name, address and details of tax underpaid are published by HMRC.  This list can be searched for and accessed by anyone online, giving significant scope for reputational damage.

Following the introduction of the Common Reporting Standard (CRS) and various Beneficial Ownership Registers, HMRC’s ability to access third party information in other jurisdictions has increased significantly.  These new data sources will enable HMRC to more easily identify individuals who have not ensured that their tax affairs are up to date.

HMRC have made it clear that they will not hesitate to prosecute individuals where appropriate.  Given the complexity of the UK tax legislation, it is therefore vital that all persons with any arrangement which has a UK connection undertake a review of their tax affairs.

Lancaster Knox have significant experience of undertaking such reviews.  We know what information HMRC are likely to receive under the various information-sharing agreements and we know how they are likely to view certain arrangements.  We can undertake reviews on a completely anonymised basis and can provide support, regardless of the outcome of our review:

  • If no historical inaccuracies are identified then we can provide a Report confirming that we do not consider you to have any UK tax issues to disclose.
    • This can give you invaluable peace of mind that, should HMRC ever enquire into your affairs, you have taken reasonable care to ensure that your affairs are in order. This should drastically reduce any potential penalties, in many cases to nil.
  • If, on the other hand, any potential UK tax issues are identified then you will have the option to make a voluntary disclosure, provided you register your intent to make a disclosure to HMRC before they approach you.
    • Taking control of the process can make all the difference when it comes to negotiating penalties, and demonstrating to HMRC that you are keen to ensure that your tax affairs are in order.

If you have already been approached by HMRC and you wish to discuss what to do next, please visit our tax enquiry page  or give us a call on the number above and one of our specialists would be delighted to discuss how best to protect your interests, ensure that HMRC are not obtaining information they are not entitled to and ensure that the correct amount of tax is paid.

HOW CAN LANCASTER KNOX HELP?

At Lancaster Knox our Tax Investigation specialists are industry recognised and have undertaken numerous risk reviews for clients over the years, dealing with hundreds of potentially contentious situations with HMRC.

We are adept at managing interactions with the tax authorities to ensure that the process runs smoothly and that your interests are best protected.

Lancaster Knox will work with you (and your current adviser, if applicable) to:

  • Undertake a review of your/the corporate’s affairs and any structures,
  • Quantify the tax risk (if any),
  • Arrange a UK tax disclosure (if necessary) prior to the 30 September 2018 “Requirement To Correct” deadline, and
  • Ensure that HMRC do not seek to obtain any further information they are not entitled to.

We appreciate that, often, this is the first tax disclosure that the client has ever made and voluntarily approaching HMRC can be a nerve-wracking experience.

Lancaster Knox will ensure that, if a disclosure is required, you are fully supported and we will make certain that HMRC do not seek to obtain information they are not entitled to, that the process is as unobtrusive as possible and give you peace of mind that any historical tax inaccuracies are resolved as soon as possible.