Two taxpayers in business together almost came a cropper with HMRC. HMRC raised a valid enquiry into their personal tax affairs issuing Code of Practice 9 (Cases of suspected serious fraud). All perfectly normal – in my world anyway! My clients had ignored my warning – don’t underestimate the ingenuity of HMRC
Despite having explained the seriousness of CoP9 and how it was in their best interests to take this opportunity and make a full and complete disclosure, they chose to do it their way.
They both denied any wrongdoing whatsoever. They each backed each other up and, with the benefit of hindsight, avoided telling me the truth. Moreover, HMRC allowed them both to enter the Contractual Disclosure Facility (CDF).
HMRC gathers information from everywhere and it is processed through CONNECT. They can visit premises and be real customers. Inspectors can live in the neighbourhood and observe what is going on around them. HMRC can access DVLA and request data from all sorts of places. So don’t underestimate the ingenuity of HMRC.
Putting taxpayers on the spot
You might think that HMRC deliberately want to put taxpayers on the spot. What better opportunity to do so than in a meeting especially when the taxpayer is representing themselves.
To cut a long story short, HMRC had already obtained all the parking tickets and camera footage of a shopping arcade where building work was being carried out by my client. It turned out that none of the income was being declared by my clients, there were also issues over the company’s CIS and VAT returns.
When HMRC confronted the taxpayers with the parking transgressions in a meeting, I immediately stopped the meeting.
It all resulted in a further disclosure being made to HMRC. HMRC subsequently showed me the voluminous email traffic and payment records they had in their possession.
Can HMRC get access to emails and texts?
Yes. Subject to certain conditions. Those conditions centre on what type of investigation is being conducted. Fraud can be suspected at any time. If HMRC are seeking to prosecute taxpayer, then providing they follow the correct procedures, a taxpayer can even be compelled to hand over passwords etc. to gain access to such communications.
But in a civil environment, the rules are quite different. But will that stop HMRC from asking for access in just the same way? Perhaps or perhaps not.
Sheer force of personality
There are many occasions where taxpayers assume that because HMRC has asked for it that HMRC are entitled to it. That is not always the case. Again, if the taxpayers are unrepresented, HMRC’s request can go unchallenged.
The moral of the story?
If someone wants to keep something from you they will. One lie will often lead to another, and another. You can lead a horse to water but you can’t make it drink!
For my clients – well they treated it almost like a game and totally underestimated the resourcefulness and ingenuity of HMRC – ultimately to their cost. The level of penalties levied reflected the their lack of telling, helping and giving.
My clients were lucky not to be prosecuted.