June 21, 2018
Tax can be a nightmare to calculate, and, on occasion, you’ll soon discover that the hard work you’ve put into ensuring that you’ve paid the right amount has all been for nothing – the total that you’ve submitted is incorrect, and a tax dispute has been raised. So, why does this happen and how are matters like this resolved? The specialists at Prosperity Law understand how frustrating it is to navigate the world of tax disputes, and have put together this useful guide in order to reveal why tax is disputed and what can be done to iron things out.
Problem: Until 2013, when Pay As You Earn tax was calculated – whether by businesses or individuals – there was often a discrepancy between the total found and the amount requested by HMRC. Naturally, any issues of this kind need to be investigated in case of any intentional fraud, but, more often than not, the reasons are actually completely accidental. With business payroll systems in particular, changes made within various administrative processes can result in incorrect information being submitted. If, for example, an employee leaves a company and is then re-hired in a different capacity, the system may become confused and record incorrect information. The same could occur on a larger scale if a company decided to change the payroll software it used and migrate existing information across to it.
Resolution: It’s usually the case that HMRC will be able to detect where the discrepancy has occurred fairly easily. If this is not the case, the information of your dispute will be sent to their Charge Resolution Team, where it will be investigated. The resolution of your dispute is likely to take some time, but the specialists at HMRC will look into everything in an attempt to resolve the issue. If you’re not happy with the results, it’s definitely worth getting in touch with a legal specialist to represent you and launching an appeal.
Corporation Tax Avoidance
Problem: If there is an issue or a discrepancy related to the amount of corporation tax your business has been paying, you may be investigated for corporation tax avoidance. Depending on the size of the miscalculation and the nature of your business, an investigation of this kind could prove particularly damaging to your reputation and, possibly, to your finances should you be asked to pay a fine for incorrect or late payment. Because of this, it’s naturally highly recommended that you – or whoever deals with your company’s finances – pays extremely close attention to calculating the amount of corporation tax owed each financial year.
Resolution: The best way to resolve a dispute related to corporation tax is to first study all relevant documentation related to your taxes to try and pinpoint what may have gone wrong. If, after this, you’re confident that the amount paid was correct, you should appeal to HMRC with any evidence that you and your financial team may have to prove that this is the case. If your evidence is rejected, it may be time to seek legal representation.
Problem: Generally, VAT stands at 20%, but there are some exceptions. You may also find that, in some situations, VAT is discounted or removed as part of a special offer or arrangement. This is why it is extremely important to study all receipts and invoices closely and calculate the correct amount of Value Added Tax, particularly if you’re in the process of claiming it back. If you accidentally claim too much, an investigation may be started.
Resolution: If you can prove straight away that you have not made an error, it is possible for HMRC’s dispute to be dropped. However, if you are sure that all of your accounts are correct but your arguments and evidence are not accepted, it may, again, be worth getting in touch with legal experts specialising in taxation disputes.
Problem: This is one of the most common taxation errors in existence as more and more people take the leap to freelance work. Filling in a self-assessment tax return can leave many people scratching their heads and if you’re working multiple jobs – some as an employee and others as a sole trader, for example, it can be difficult to work out the exact figure you owe. Everyone’s professional situation is difficult, which means that disputes are many and varied.
Resolution: As with any of the other errors above, you may find that there is nothing you can do but pay whatever fine may be handed to you for completing a tax return incorrectly. However, if you can prove to HMRC that it was correct, these disputes can prove relatively speedy to resolve. Again, should your evidence or arguments be rejected, get in touch with a lawyer or solicitor and discuss the matter with them. You may find that, with the correct support, the dispute can be dropped.