This was a client from London that was being investigated by HMRC. The client had acquired a number of investment properties over the recent years. HMRC’s main concern was how the acquisitions were financed considering the client’s regular income not being sufficient to justify this. In addition HMRC were looking into the client’s rental income and expenditure. The client had received large sums of cash as inheritance from his parents based abroad but there was no audit trail of the monies being transferred. At one stage, our client was even ready to pay tax to HMRC as he felt that his case was not strong enough and the monies inherited could not be proven. There were a few expenses that our client had not claimed that could have been claimed. We dealt with HMRC using our experience and knowledge of HMRC’s practices and put forward strong arguments and alternate sources of evidence defending our client’s position. Eventually after three exchanges of letters HMRC proposed that they were willing to close the enquiry without any adjustments if our client chose not to claim the unclaimed expenses. Our client was happy to accept this proposal and the investigation was closed with no tax to pay. We are grateful to the HMRC inspector for his cooperation and adopting a positive approach towards our client’s circumstances.
Our analysis: This client came to us as soon as he received the letter from HMRC opening an enquiry. As there had been no prior involvement by another accountant, we were able to close this investigation swiftly. This is in contrast with cases where individuals tend to go to the cheapest accountant in the market to seek help which makes matters worse. These taxpayers eventually end up paying a lot more in taxes and fees as they eventually realize they need to appoint a tax specialist firm to represent them.