Is this right? HMRC and their S9A enquiry or S29 Assessment Is this right? HMRC and their S9A enquiry or S29 Assessment
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  1. #1

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    Default Is this right? HMRC and their S9A enquiry or S29 Assessment

    I had a discovery assessement into 2009/2010 for a scheme I used - I got the DA about 10 years ago, I accept the APN I had to pay in 2015 and that HMRC got to it in time to assess the scheme.

    For the same 2009/2010 year I used another scheme that HMRC didn't enquire about or assess.

    In fact it wasn't until 2018 when I gave them a list of all my loans. The trust did the same. That's when HMRC knew about the other scheme I used - 8 years after they issued a DA for the first scheme.

    They've now issued me with one of their annoying calculations and wording saying "Once HMRC opens an S9A enquiry or S29 Assessment for any year, we can expand it to other areas until it is closed."

    Is HMRC really playing by the rules here?

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    Quote Originally Posted by EBTContractor View Post

    They've now issued me with one of their annoying calculations and wording saying "Once HMRC opens an S9A enquiry or S29 Assessment for any year, we can expand it to other areas until it is closed."

    Is HMRC really playing by the rules here?
    Certainly a section 9a enquiry is specific only as to tax year and therefore can cover all matters in that year.

    A Discovery/s 29?

    I would be able to make a decent case for the second scheme to be forever closed because HMRC is not really entitled to have two bites at discovery. That said, it's not quite that straightforward.

    What might be more of a problem is why the second scheme was not "disclosed" when the DA arrived. Whilst I accept that the DA is effectively the end of an enquiry and HMRC cannot ask more questions legitimately (but still do) I'd need to consider which schemes were in play and look at some contemporaneous correspondence.

    My worry (and I confess it's not a researched position, just a concern based on general principles) is whether non disclosure of the second scheme might be seen by HMRC as something more serious than just careless. If it's seen as deliberate or concealing behaviour, then time limits can be expanded.

    The next DA time limit after four years is six years. Probably safe from that.

    There is a twelve year limit for matters involving offshore parties. Many schemes had offshore elements. However I think this applies only where HMRC is looking for information from offshore sources and I've seen no evidence of that in contractor schemes.

    The biggie is of course twenty years for fraud. The use of such rules in the contractor space is extremely rare (I think we've seen none) but possible. I'd not wish to overplay this route as a risk because I think there are lots of reasons why it should not apply.

    I suggest that you collect all your correspondence with HMRC, promoter, agencies etc from the time of using the schemes to today and share it with your adviser.
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    Quote Originally Posted by EBTContractor View Post
    I had a discovery assessement into 2009/2010 for a scheme I used - I got the DA about 10 years ago, I accept the APN I had to pay in 2015 and that HMRC got to it in time to assess the scheme.

    For the same 2009/2010 year I used another scheme that HMRC didn't enquire about or assess.

    In fact it wasn't until 2018 when I gave them a list of all my loans. The trust did the same. That's when HMRC knew about the other scheme I used - 8 years after they issued a DA for the first scheme.

    They've now issued me with one of their annoying calculations and wording saying "Once HMRC opens an S9A enquiry or S29 Assessment for any year, we can expand it to other areas until it is closed."

    Is HMRC really playing by the rules here?
    By not disclosing the other scheme, HMRC are effectively saying you've acted more than just 'carelessly' and that gives them power to look again. Ive seen this time and time again. You're going to have a hard job proving you were 'careless' in failing to disclose the other scheme.

    I hope you didnt get a STAR letter when they were dealing with the previous APN else you really will be up excrement creek!

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    Quote Originally Posted by TheDogsNads View Post
    By not disclosing the other scheme, HMRC are effectively saying you've acted more than just 'carelessly' and that gives them power to look again. Ive seen this time and time again. You're going to have a hard job proving you were 'careless' in failing to disclose the other scheme.

    I hope you didnt get a STAR letter when they were dealing with the previous APN else you really will be up excrement creek!
    I'd disagree with the first statement.

    By issuing a DA HMRC has not asked for a disclosure at that time and have instead done their own investigation and decided that the tax due should be increased. They've simply not investigated properly.

    At no time in the DA process are taxpayers required to disclose anything (because then there would be no discovery).

    The point around STAR is also debatable.
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    Quote Originally Posted by webberg View Post
    I'd disagree with the first statement.

    By issuing a DA HMRC has not asked for a disclosure at that time and have instead done their own investigation and decided that the tax due should be increased. They've simply not investigated properly.

    At no time in the DA process are taxpayers required to disclose anything (because then there would be no discovery).

    The point around STAR is also debatable.
    Yeah whatever. I disagree with your assessment on this one. HMRC bend the rules all the time and unless a tribunal overturns the decision, it will stand.

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    Quote Originally Posted by TheDogsNads View Post
    Yeah whatever. I disagree with your assessment on this one. HMRC bend the rules all the time and unless a tribunal overturns the decision, it will stand.
    HMRC cannot point to any law in or around section 29 TMA 1970 which requires "disclosure".

    The entire purpose of discovery is for HMRC to reflect their finding that tax has been under assessed.

    "Their finding" - no taxpayer disclosure required - in fact exactly the opposite.

    No amount of "bending" the rules can make the law say or create the opposite effect.

    However, as I said, it's not totally clear and if you would like to state your knowledge, expertise or direct experience of the position you hold, I'm more than happy to debate it.
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    Quote Originally Posted by webberg View Post
    Certainly a section 9a enquiry is specific only as to tax year and therefore can cover all matters in that year.

    A Discovery/s 29?

    I would be able to make a decent case for the second scheme to be forever closed because HMRC is not really entitled to have two bites at discovery. That said, it's not quite that straightforward.

    What might be more of a problem is why the second scheme was not "disclosed" when the DA arrived. Whilst I accept that the DA is effectively the end of an enquiry and HMRC cannot ask more questions legitimately (but still do) I'd need to consider which schemes were in play and look at some contemporaneous correspondence.

    My worry (and I confess it's not a researched position, just a concern based on general principles) is whether non disclosure of the second scheme might be seen by HMRC as something more serious than just careless. If it's seen as deliberate or concealing behaviour, then time limits can be expanded.

    The next DA time limit after four years is six years. Probably safe from that.

    There is a twelve year limit for matters involving offshore parties. Many schemes had offshore elements. However I think this applies only where HMRC is looking for information from offshore sources and I've seen no evidence of that in contractor schemes.

    The biggie is of course twenty years for fraud. The use of such rules in the contractor space is extremely rare (I think we've seen none) but possible. I'd not wish to overplay this route as a risk because I think there are lots of reasons why it should not apply.

    I suggest that you collect all your correspondence with HMRC, promoter, agencies etc from the time of using the schemes to today and share it with your adviser.
    I have everything HMRC has posted me over the years.

    HMRC's DA letter sent in November 2013 states it's "an assessment to income tax for the year 2009-2010.... under the provision of Section 29. The assessment is into contract employment outside the UK".

    In the letter they mention the EBT scheme by name. They make no mention of the other scheme I was in for the same year (2009-2010). They don't ask/enquire in the DA if I've used other schemes so I don't mention the second scheme as I am not asked. I send back to HMRC a letter asking for the tax to be postponed.

    In July 2015 I pad the APN for this discovery assessment related to the EBT that HMRC are aware of.

    The accountants for the EBT scheme submitted the tax return for the 2009-2010 year, so easy for HMRC to spot this.

    For the second scheme used in the same tax year I have a letter from HMRC dated January 2011 stating "... we do not require you to complete a SA return for 2009/2010, and do not intend to send you any further returns in the future". So I didn't submit a SA for 2009/2010 with the name of the second scheme.

    So my point is HMRC can't all of a sudden start adding to the initial DA because they never enquired about the second scheme in the first place? It was always and only about the EBT, the first scheme.

    The only reason HMRC came to know of the second scheme used in 2009/2010 was because the trust and myself gave them the loan amonts in September 2018 - four years and ten months after the DA was issued and received by me.
    Last edited by EBTContractor; 6th October 2020 at 02:47.

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    Quote Originally Posted by TheDogsNads View Post
    By not disclosing the other scheme, HMRC are effectively saying you've acted more than just 'carelessly' and that gives them power to look again. Ive seen this time and time again. You're going to have a hard job proving you were 'careless' in failing to disclose the other scheme.

    I hope you didnt get a STAR letter when they were dealing with the previous APN else you really will be up excrement creek!
    In the Discovery Assessment they don't ask me if I've used other schemes, they just attach a calculation for the first EBT scheme I used.

    If they don't ask/enquire about anything else, why would I be required to tell them about the second scheme? For the same tax year they also sent me a letter saying not to submit a self assessment. This letter was received by me in January 2011 - the DA into the first scheme was received by me in November 2013.

    I've not received a STAR letter from HMRC, and none has been sent from what I can see in the SAR they sent me, although it really didn't show much.
    Last edited by EBTContractor; 6th October 2020 at 02:26.

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    Quote Originally Posted by EBTContractor View Post

    If they don't ask/enquire about anything else, why would I be required to tell them about the second scheme? For the same tax year they also sent me a letter saying not to submit a self assessment. This letter was received by me in January 2011 - the DA into the first scheme was received by me in November 2013.
    Because it is your responsibility to report your tax affairs correctly. I think were that post to be in your own name rather than an anonymous forum, HMRC could use your statement to argue it was deliberate and go back 20 years
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    Quote Originally Posted by EBTContractor View Post
    They've now issued me with one of their annoying calculations and wording saying "Once HMRC opens an S9A enquiry or S29 Assessment for any year, we can expand it to other areas until it is closed."
    You could write back to them and ask them to cite specifically what, in law, allows them to expand the scope of an S29 in this way.

    It wouldn't surprise me if they are trying it on but I doubt they'll back down easily. They ain't got much to lose by chancing their arm, and you'd probably have to drag them to a tribunal to try and get this overturned.

    Sadly, the cards are stacked against a lone taxpayer in disputes like this.
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