Case studies

Please click on the links below for further information on the case studies.

• Anti-Avoidance Enquiry

• PAYE Problems

• Divorce and domicile

Issue: Anti-Avoidance Enquiry

HMRC contended that the UK resident owner of an offshore company had set it up for tax avoidance reasons and that under anti-avoidance legislation he was personally assessable to UK Income Tax on all of its income.

What we did:

BDO explained to HMRC that there were bona fide commercial reasons why the owner had chosen to set up the company in the offshore jurisdiction rather than in the UK.

Result:

Despite strong initial resistance HMRC ultimately accepted that the anti avoidance legislation did not apply.

Issue: Undisclosed Offshore Income and Gains not Qualifying for the Liechtenstein Disclosure Facility

A retired gentleman approached us as he was subject to a tax enquiry resulting from bank records obtained by HMRC.  He had placed funds in an offshore portfolio investment account made some years ago.  The funds were managed and invested by the bank under a mandate.  The client had never declared any of the income and capital gains on his Tax Returns.  HMRC believed that the tax at stake was possibly in the region of £500,000 over a twenty year period plus interest and penalties.  However, this figure could not be properly verified as the bank had not retained all the necessary information.

What we did:

We approached HMRC Specialist Investigations and persuaded them to operate the case under Code of Practice 9.  This gave the client the protection from prosecution subject to him making a full disclosure.  We completed a disclosure report for the client in the agreed time scale and negotiated a pragmatic approach with HMRC to quantify the tax liabilities that could reasonably be considered to have arisen in the absence of the full information.

Result:

We achieved a mutually acceptable settlement between the client and HMRC for £200,000 plus interest and penalties.

Issue: PAYE Problems

A French employee of a multinational organisation overpaid PAYE tax as a result of a mix-up with the company’s payroll arrangements.  HMRC opened a tax enquiry into the client’s repayment claim and challenged his tax residence status. 

 What we did:

BDO established the facts in relation to the client’s whereabouts during the year in question, and prepared a report which clearly set out the client’s case and supported the report with evidence.  The report satisfied the HMRC that the individual was non resident for UK tax purposes.  We also demonstrated that expenses were incurred wholly, exclusively and necessarily for business purposes and he was therefore entitled to a tax deduction, preventing a tax charge of  £120,000. 

Result:

HMRC was satisfied to the extent they closed the tax enquiry and repaid in excess of £500,000.  HMRC also agreed that the client no longer had to send in UK tax returns unless his circumstances changed.

Issue: Divorce and domicile

In the midst of a divorce case, it came to light that one party had never previously paid any UK tax despite being tax resident.  BDO helped them to make a voluntary disclosure to HMRC.

The individual had significant foreign income and gains and a large proportion of it was retained in offshore banks.  The amount of UK tax due depended on the individual’s domicile status and how much untaxed income he had brought into the UK.

What we did:

Domicile refers to your permanent home and is often linked to your father’s place of birth.  The individual had a complicated set of circumstances, including the client being born in the UK and then adopted.  BDO presented the facts clearly and concisely to HMRC. 

Result:

After some hard negotiation BDO persuaded HMRC that the individual was not domiciled in the UK, and saved the client over £100,000.

The agreed non-domiciled status was also useful in structuring the divorce settlement in a tax efficient manner.