Scaffold firms owes HMRC £1million (1 Viewer)

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HMRC demands £1m from scaffolder – over £11,000 unpaid tax - Telegraph

A court intervenes after taxman orders trader to pay an astonishing £930,000 when actual tax due was barely 2pc of this sum

A scaffolder who failed to declare £11,000 in tax has been charged almost £1 million by HM Revenue & Customs in a calculation bungle that experts say is a "shocking" and "wholly inappropriate" estimate of one man's income.


The taxman accused Matthew Hodges of evading £529,536 in VAT due on the scaffolding projects he carried out since 2006. On top of the unpaid tax, HMRC demanded £399,734 as a penalty for non-payment.


But Mr Hodges, a sole trader from Downe in Kent, actually owed just £11,153 in unpaid VAT from his business, Aqua Blue Scaffolding, according to a tax tribunal held in May.


show Mr Hodges had failed to declare VAT on up to nine in ten projects he carried out in Kent and South London between 2006 and 2011, in many cases taking cash in hand as payment.


Without proper records to prove his income, the taxman came up with its own estimates, proposing a figure of more than half a million pounds in unpaid VAT.

The tribunal said he actually owed £11,153, based on estimates of the reasonable number of jobs he could have completed in the five-year period
Something has gone seriously wrong with HMRC's approach," said Andrew Hubbard of Baker Tilly, the accountancy firm, speaking to Telegraph Money.

Mr Hubbard said: "It looks to be little more than a simple back-of-the-envelope calculation with no thought being given to the reality of how one person could have achieved a turnover of that level."

The calculation comes as HMRC moves toward having new powers to raid bank accounts of people suspected of non-payment.

New rules introduced last year allow the Revenue to demand that people pay tax within 90 days of receiving an "accelerated payment notice", even before they have a chance to appeal the sum. This could involve paying back taxes, late payment interest and penalties to HMRC.

"These figures have stretched credulity to such a point that a court has to intervene and say that the tax officer hasn't used their best judgment," said Mr Hubbard
The scaffolder's tax dodge was discovered during "street sweeps" carried out in the late 2000s.

Tax officers will patrol the streets looking for the display signs that tradespeople, such as builders, skip firms and scaffolders, typically erect outside properties they are working on.

The taxman found that, for every ten properties with Aqua Blue Scaffolding signs – Mr Hodges' company name – he had submitted just one VAT return.

Mr Hodges claimed that some of these signs were on loan to a friend who was, he said, "using my gear".

When HMRC calculated the tax due from these undeclared jobs, it simply multiplied the VAT due by ten, arriving at a sales figure of more than £4m for a five-year period.

This was "wholly unrealistic for such a one-man operation," said Nichola Ross Martin, of Ross Martin Tax Consultancy, Mr Hodges' representative at the tribunal.
There would not be sufficient days in the year to erect and dismantle enough scaffolding to achieve such a return," she added.

Judge John Brooks, of the tax tribunal, agreed. He said: "For Mr Hodges to have generated such additional turnover he would either have had double the amount charged to his customers or increased his work force."

HMRC later admitted its own calculations of more than £500,000 in unpaid VAT were "unrefined".

The tribunal did, however, say that Mr Hodges' non-payment was "deliberate and concealed" – despite the scaffolder's insistence that he should be given special consideration on health and marital grounds. Mr Hodges was ordered to pay £7,807 in penalties on top of the tax due, a fraction of the original £400,000 penalty proposed by HMRC.

Taxpayers should be given a "safety net" to stop similarly absurd assessments of unpaid tax, said Mr Hubbard of Baker Tilly.

"The burden of proof is on the taxpayer, and in this case he had robust professional support to show how misguided HMRC's figures were – otherwise a substantial injustice might have taken place
 
You have to wonder how much time the tax men wasted away driving round the streets of Kent gathering all this data. Seems to me this is a time-wasting exercise to keep them out of the office so there bosses don't realize the are not cleaver enough to catch the real large scale tax evaders.

As I have said many times before if you are carrying out the business of contract scaffolding always charge and pass on the Vat element. If your customer is zero tax status he will be able to reclaim all VAT paid from HMRC. All professional companies work in this way.
 
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