Help ...potential HMRC investigation for section 106a

[skinskan]

Hi - hoping someone might have some advice / reassurance. Company in process of liquidation through proper IP channels. I have been trying to get on with my life while it's going on and thought all was in hand until today when I arrived home to a letter from HMRC (hand delivered so I missed their visit) informing me of potential investigation re Tax Fraud section 106a 1970 (I don't even know what that is!) ...as you can imagine I am now envisioning bankruptcy and a jail sentence. I would like to say that I did my business by the book I had a book keeper and accountant to keep me straight. Logically I know that I did all my corporate paperwork as required so don't understand where this 'fraud' has come from but HMRC terrify me! I will call them tomorrow but wondered if anybody had any experience of this. All the paperwork is now with the liquidator so do I refer them to IP.? Do I need a lawyer at this stage? ...just when I thought it was getting near the end. Thanks in advance for any help.

 

[UK Contractor Accountant]

This looks like an investigation into Income Tax fraud relating to your personal Tax Returns rather than the company taxes.

Have you declared all your dividends and income on your Tax Returns?

 

[AllUpHere]

This looks like an investigation into Income Tax fraud relating to your personal Tax Returns rather than the company taxes.

Have you declared all your dividends and income on your Tax Returns?

I would advise the op not to answer that on an open forum on which she is easily identifiable.

 

[UK Contractor Accountant]

I suggest you get in touch with your Accountant to see if he/she has any idea what the investigation is about.

If a member of the FSB you maybe covered under members benefits for tax investigation insurance and free legal helpline.

 

[skinskan]

Thank you! Nothing to hide as I never took dividends and just paid myself through the company (it's all recorded on Sage Paye system which IP has copy of). My salary was modest - I earned less than some of my employees! I have p45 to prove it all. I had registered for Self Assessment but never received anything from them and assumed that because company had folded they didn't bother sending me the pack...I shall see tomorrow! X

 

[UK Contractor Accountant]

On the face of it I don't think you have much to worry about - looks like a misunderstanding on the Tax Return front.

Have you kept a copy of the SA registration you can produce to HMRC?

 

[skinskan]

Yep - I'm sure I have it in paperwork somewhere so I will dig it out tomorrow. Nice big glass of wine now for nerves!

 

[Alan R Price]

They are referring to section 106A of the Taxes Management Act 1970 - see this http://www.legislation.gov.uk/ukpga/2010/8/schedule/7/part/16. The main thrust of this section is as follows: "A person commits an offence if that person is knowingly concerned in the fraudulent evasion of income tax by that or any other person." This refers to a criminal offence and the burden of proof is that they would have to prove the offender to be guilty "beyond all reasonable doubt" of fraudulently evading income tax.

Only OP will know if she has deliberately done this, but it seems to me like a scare tactic to get her to cooperate. The best advice is to admit nothing, and refer them to the liquidator, since he has all the records. Do not speak to HMRC on the phone or in person, and if they turn up at the door, say nothing other than, "The company's records are with the liquidator and you should contact him. If you require any further information, you must put your request to me in writing, stating exactly what you require, and the grounds for your request." If there is a follow-up request, that is the time to take legal advice.

 

[skinskan]

Well...I spoke to the 'fraud' department this morning (sorry...before I read your post Alan). I thought as I have absolutely nothing to hide as I ran my business by the book then I should just deal with it as soon as and there is nothing to admit to. As it turns out it's not to do with me directly (he claims) but with a sub-contractor who worked for me who appears to have claimed more CIS deductions than were actually submitted by my company through the HMRC online CIS system. HMRC had already contacted the liquidator to get the documents that they needed but as the IP has not yet requested the company documents from me until last week (they are still in my garage) the investigator wants to come to my house and collect what he needs.

From your definition above it seems to me that they are trying to establish if I have knowingly submitted false information which is definitely, 100% NOT the case. I get scared if I get a parking fine!

He is coming tomorrow to collect and he also made mention about a witness statement but obviously I will read very carefully and not sign anything if I don't feel confident and will get legal advice.

Thanks Alan for your info and I have already started looking for legal advice just in case I need it.

I will keep people posted just in case they are facing something similar and might be interested in the outcome.

 

[David A]

He is coming tomorrow to collect and he also made mention about a witness statement but obviously I will read very carefully and not sign anything if I don't feel confident and will get legal advice..

I would suggest you speak with your IP before allowing documents to be collected. Also, in your shoes, I would resist making any witness statement. It's not your problem, and I worry that by getting involved it could come back to bite you on your bum. For example, what if the subbie took umbridge and subjected you to reprisals. Let HMRC fight their own battles.

 

[skinskan]

Thank you David - I will be very very careful tomorrow. I have asked IP to confirm in writing that they are releasing docs for specific purpose and I won't be signing any witness statement if unsure as subbie could turn nasty although not much to come back at me at as I have all invoices and full report from Sage on what he got and what we submitted.

 

[mhall]

They can't force you to make a witness statement. It sounds like your Subby is the crook but to keep yourself safe I would let your Subby know that HMRC have demanded all your records about them from the accountant. Tell the Subby that you have said nothing and refused to do a witness statement as you don't want to get involved. It is then his problem and you have "been a mate" and tipped him off. As much as its tempting to just fully co-operate and spill the beans, HMRC don't have to live with the consequences as you will have to. This way you can keep everyone happy whilst staying perfectly legal.

 

[Charlie B ACS]

Just to add, I'd make sure you keep copies, or preferably let them only take copies of the documents, so that the IP has the full picture.

 

[skinskan]

Hi All - just an update on Friday's visit. I spoke to the IP who said the only reason they were coming to me was because I had the paperwork and not the IP (only taken them 4 months to ask for it and I wonder if HMRC hadn't asked them for it would it still be sitting in my garage). They confirmed they could take the Sage CIS report (I have a copy). The 'witness statement' basically just confirmed that I knew the subbie and that he worked for me and that's it. I have spoken to the subbie directly as he knows he is being investigated but is disputing it and I have to say the HMRC figure does not come close to the submissions we actually made (using the HMRC systems) and are closer to the figure they are claiming. We shall see. I asked them outright if I was being investigated in conjunction with the subbie because to my mind they two are linked, either my submissions are wrong, HMRC are wrong or the subbie is.

Thanks to all of you who have taken the time to comment and give advice...much appreciated as always.