Tax from 30 years ago
Discussion
You may have seen this in the Times
www.timesonline.co.uk/article/0,,5-1069198,00.html
Short of cash, the Treasury has got the Inland Revenue going back thorugh files for up to 30 years to recover unpaid tax. A number of taxpayers are reported to have received demands for unpaid tax plus accumulated interest, with some claims dating back as far as 1974.
The cases centre on disputes that arose before the introduction of self assessment in 1996. Estimated assessments used to be issued and then, if the taxpayer did not agree, they would "Appeal" and the tax would be postponed until the true tax liability was sorted out. It seems that some issues were never sorted out, and files were simply put on the shelf with the tax liability still postponed.
Now Revenue officials are trawling through the lists — which take in everything from income tax to capital gains tax — to discover what may be owed. As there is no central list, it is unclear how many cases could be outstanding or how much the Revenue stands to gain in collection.
But the Revenue are not "owed" the tax if the matter in dispute has never been settled. This creates a new worry for businesses and advisers who will be unlikely to have any records going back that far. Whenthe Revenue say that tax is owed, will you be in a position to challenge that knock on the door from the collector? Even if you do owe the tax this could create harsh cash flow problems for those who could not afford to pay now for something they did
many years ago.
In fact the Revenue can, and should, be challenged. Any demands for back tax should be met with a request for a detailed explanation of the basis for the charge and infomation on how the appel was settled. Also check your bank details (if you can)to see if you did pay. Remeber that interest can be waived by the Government on unpaid tax if the fault for the delay lies wholly or partly with the Revenue. A delay of 30 years might make you think that the Revenue should take at least some of the blame!
Whilst the Limitation Act does not apply to any assessed tax debt, the little-known principle of Equitable Liability may help where the amount of tax being demanded is wrong. If there is good evidence to show what the correct amount of tax should be, the Revenue may agree to collect only that amount.
www.timesonline.co.uk/article/0,,5-1069198,00.html
Short of cash, the Treasury has got the Inland Revenue going back thorugh files for up to 30 years to recover unpaid tax. A number of taxpayers are reported to have received demands for unpaid tax plus accumulated interest, with some claims dating back as far as 1974.
The cases centre on disputes that arose before the introduction of self assessment in 1996. Estimated assessments used to be issued and then, if the taxpayer did not agree, they would "Appeal" and the tax would be postponed until the true tax liability was sorted out. It seems that some issues were never sorted out, and files were simply put on the shelf with the tax liability still postponed.
Now Revenue officials are trawling through the lists — which take in everything from income tax to capital gains tax — to discover what may be owed. As there is no central list, it is unclear how many cases could be outstanding or how much the Revenue stands to gain in collection.
But the Revenue are not "owed" the tax if the matter in dispute has never been settled. This creates a new worry for businesses and advisers who will be unlikely to have any records going back that far. Whenthe Revenue say that tax is owed, will you be in a position to challenge that knock on the door from the collector? Even if you do owe the tax this could create harsh cash flow problems for those who could not afford to pay now for something they did
many years ago.
In fact the Revenue can, and should, be challenged. Any demands for back tax should be met with a request for a detailed explanation of the basis for the charge and infomation on how the appel was settled. Also check your bank details (if you can)to see if you did pay. Remeber that interest can be waived by the Government on unpaid tax if the fault for the delay lies wholly or partly with the Revenue. A delay of 30 years might make you think that the Revenue should take at least some of the blame!
Whilst the Limitation Act does not apply to any assessed tax debt, the little-known principle of Equitable Liability may help where the amount of tax being demanded is wrong. If there is good evidence to show what the correct amount of tax should be, the Revenue may agree to collect only that amount.
Although the Inland Revenue can go back as far as they want when collecting unpaid taxes, under the old "Assessment" system there were deadlines which both tax payers and the Revenue were supposed to stick to. If you can find that the Revenue failed to act within their own time limits, I think you would have no real trouble.
To be honest, a large portion of those who owed tax in 1974 would now be dead.
To be honest, a large portion of those who owed tax in 1974 would now be dead.
I have just received a letter from the Inland Revenue asking about stock options. They have reason to believe that my 00/01 return is not correct and have asked me to check it. Ie We think that there may be more options which you have exercised.
To be honest I do not have the records and I cannot remember. Therefore I have to contact my ex company to find all the details. In fact my ex wife did the return for me.
What is the tax offices attitude towards this if there are more options and I have underpaid tax. Ie. I will pay any underpaid tax as it would be a genuine mistake on my behalf for trusting me exwife to do the return!
To be honest I do not have the records and I cannot remember. Therefore I have to contact my ex company to find all the details. In fact my ex wife did the return for me.
What is the tax offices attitude towards this if there are more options and I have underpaid tax. Ie. I will pay any underpaid tax as it would be a genuine mistake on my behalf for trusting me exwife to do the return!
If it is eventually found that you have, indeed, paid too little tax for 2000/01, they will ask you to pay it. What's more, they will charge you interest from the date the tax was due - 31 January 2002. They will also charge you surcharges as the tax , obviously, was still unpaid at 28 February 2002 and 28 February 2003 and 29 February 2004. Finally, they may charge you penalties. The penalties can be as high as the unpaid tax amount (i.e you end up paying double what you would have originally). However, that is a worst case scenario and the Revenue have the power to mitigate penalties to a level they see fit based on the level of co-operation received from you in the course of the enquiry. They might take the fact that you used someone else to complete your return when deciding on the penalty levels.
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