‘I’ll make a note later’
Sounds familiar doesn’t it?
Whether you are an adviser or a taxpayer, I bet you hear that expression possibly once a month. Of which, I’d like to think 99% will make a note; but how detailed will that note be?
As a professional adviser, from day 1 of my training I was asked/told/directed/shouted at – to make a note. And today I still do, sometimes. I am not entirely paperless (there’s something about shuffling papers on your desk).
Most of my notes are now electronic. Probably not all in compatible software and even less likely to all be filed in the most logical place. But with search terms, I can normally get there.
But key to all this is knowing what to make a note of. The basics consist of a date, subject matter etc. Let’s take a deeper look…
Date
Hmm. Date of the initial note, the call or meeting itself? They can be days if not weeks apart.
I would suggest that in every case I handle I can be heard saying, if only we had a date. And that is not HMRC talking either – that’s me, before they’ve even dug further into the case.
Intentions are good, actions are better. A step plan can be very useful. Dates are so important.
Subject matter
How many times do you start at the beginning and almost wander aimlessly to the end going down potential rabbit holes galore and off on a tangent. What starts off as a specific matter becomes a chameleon. So what do you choose to be the subject matter and how do you stick to it?
Why is all this even relevant?
HMRC have a habit of asking for “information” often accompanied by “documentation”. It could be one of a million invoices, bank transactions undertaken by a taxpayer. All of these exist and are there to be found and provided to HMRC to prove a point.
But that note, you know about the call or meeting when thingy was discussed, and it was decided to go ahead? Was the note ever made in the excitement of the conversation? HMRC tend not to deal with thingies or thingamajigs, whatsits and alike. They prefer documents. That note (if it had been made) would have counted as a document. It might even be contemporaneous which would be even more helpful.
Everything is relative
Not everything can be measured in absolute terms, A recent case of mine took a record (or two or three). The taxpayer made widgets, honest. They developed screen widgets for mobile phones.
In a fast-paced market, you either grow or get taken over. The client grew by acquisition. Deal after deal. Rightly or wrongly accountants and solicitors came and went. Too expensive. So the owner was light on making notes but was a lover of “copy and paste”. Well, that’s something I suppose.
But having grown rapidly now it was the company’s turn to be taken over, and this is where the problems started.
Looking back as to which company was bought in more detail became a challenge. Shares in other companies were bought, shares sold, shares issued as a reward to key workers – it got complicated very quickly.
Most transactions were fully documented. But stamp duty was overlooked, stamping was overlooked, Companies House was overlooked, etc. etc. and it’s fair to say, paperwork was overlooked.
The outcome
A Disclosure had to be made to HMRC. Not of any fraud as such but it needed a fairly detailed explanation at the outset that didn’t spook HMRC. Somebody within HMRC had to deal with it.
Two phone calls and that HMRC person now had a name, a phone number and an email address.
By working together early was key. Collaboration not confrontation worked.
It took less than 12 months from start to finish to resolve. I oringally estimated 2 years. Solicitors estimated over £70m in taxes were due. We paid just under £200,000 of tax. All plus interest. But some penalties were £Nil, 20% and one at 37%.
The moral of the story
What does this have to do with making a note you may be thinking. Well, the 37% penalty was low but it could have been lower or even extinguished if only somebody (anybody) had made a note. Or two of the crucial moments.
Needless to say, it was a fantastic outcome for my client. I was pleased too and I learnt quite a bit along the way, including a clear reminder that you must always make that note. Now. Don’t put it off or it will cost you, literally.
Not all my cases are to do with share deals but, they all suffer from a lack of supporting documentation. Not all my cases have an exposure of £70m – but whatever the amount is could finish off the taxpayer(s). You might say for me to help my clients, they need to have helped themselves and have made a note.
Whatever the tax problem, however odd it may be, I may be able to help. The odder the better, please. I offer an initial 2 hour consultation for free.
Notes cost extra!