Limited companies must keep tax documents

Wednesday 27 August 2014

Limited companies have been warned to keep hold of their tax documents even if they were previously sent to HM Revenue and Customs (HMRC) but have since been lost or destroyed.

The warning comes after a tribunal ruled that HMRC can order copies of documents from businesses that are more than eight years old, even if the tax office has already received them in the past.

This could cause complications for limited company contractors and sole traders and also highlights the importance of have a contractor accountant to take care of finances.

Shout99 posted an article on the situation as a restructuring of activities from Whitefields Golf Club in 1999 was brought to the attention of HMRC during a routine inspection of VAT in June 2003.

After that, Whitefields was asked to supply documents and it complied with the request in February 2004. No more was said about the case until HMRC tried to resume the investigation in 2011, even though it had either destroyed or lost the original documents.

Under the Finance Act 2008 it was able to call for more copies of the documents to be produced. However, Whitefields responded by saying it was unreasonable to have to send information that had already been supplied in full, particularly as it had taken so long for HMRC to follow up the case and now no longer had the documents.

This argument was rejected by the tribunal as it said HMRC conduct was not relevant in deciding whether or not it was reasonable for a company to need to provide documents under Schedule 36 of the Finance Act.

The reason for this is that in spite of the fact the documents were part of an investigation that was at least a decade old, the tribunal said that its purpose was not to review the conduct of HMRC.

Speaking to Shout99, tax expert at Oxley and Coward Solicitors Mamoon Chaudhary explained that the ruling could be overturned yet, however businesses should be more careful about destroying documents in case they are required by HMRC later.

What's more, the ruling suggests that HMRC might be able to look back as far as it wishes for information and taxpayers will be required to provide it.

This tribunal demonstrates how tricky it can be for self employed people to navigate the ins and outs of tax legislation.

Mamoon Chaudhary added that it is well understood that HMRC's power is far reaching and it will be backed by courts more often than not.

Other instances where tribunals have ruled in favour of HMRC recently include how 'false self-employment legislation', which was introduced in April this year, could be interpreted by courts.

In this case, guards were supplied by a business to particular construction sites. However, HMRC said these guards were not employees of the business and so claimed that the tax legislation applied.

As the case predated the change in rules, HMRC had to prove whether there was Supervision, Direction or Control in this case or a right to it, but the supplier of the guards said that there wasn't.


By Victoria McDonnell

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