Tax Hell is up for a New Statesman / New Media Award

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Reply To Chris Cumming

This case has now been passed to the legal team to process and take before the Special Commissioners. It will be the first time in almost three years that somebody independent has viewed the case.

It's been over a year and a half since I first put in an appeal and over six months since HMRC sent in their 'closure documents'.

This letter may not make much sense without context. I plan to create a PDF of the entire file so everybody can see what's happened with this case. Which - I hope - will encourage HMRC to reform.

Dear Chris Cumming

I acknowledge receipt of your letter dated 13 May 2008.

J Lamper’s letter 26 March 2008 asked for a response if I wanted the penalty determination appeal to be on the same date as the as the main appeal. I do not what them to be held on the same day - which is why I did not respond.

The Sussex Tax Shop is not acting on my behalf in this matter; please do not contact them again.

I see no reason why any part of this hearing should be held in private.

In the interests of fairness to all I want draw your attention to the public nature of this investigation. There has been an article written about me in The Sunday Times, here and an article written by me in The Sunday Times here. I’ve also written for accountingWEB here. I have created a website about Self Assessment tax investigations here and attached to it is a blog here. In the past I’ve recorded telephone and face-to-face interviews, I would advise you to assume that any telephone call or face-to-face interview may be recorded.

A schedule of events is listed here, if you disagree with any of the salient facts I would urge you to make me aware of them.

As was reported in The Sunday Times, I have used the Data Protection Act to get copies of files held by you about this case. I appear to have the entire file including your emails with J Lamper discussing the weaknesses in the HMRC case.

I have read the emails that warn J Lamper that her actions put her in breach of the Human Rights Act - she has failed to act on your advice.

The losses of 2005-6 are to be carried backwards, not forwards.

I think that there are two points at issue that need to be addressed immediately by the Special Commissioner.

1. Can HMRC vary its figures?

In September 2007 HMRC issued closure documents setting my tax at £2,531. I appealed this decision and as a result the tax increased to £6,664. My understanding is that HMRC do not intend to issue new closure notices and that there have been no new findings to justify such a high increase in tax liability. I have been told by HMRC officer Tim Lintott that the only reason the figure was increased (almost threefold) is because I’m appealing.

HMRC may have the privilege to change its mind after closure documents have been sent, but to increase the figure so dramatically without making any new findings seems to be a gross abuse of this privilege and a bullying tactic. The fact that they are reluctant to issue further closure notices compounds this.

2. Discovery

The issue of discovery is a complex one, there are issues of both if and when a discovery was made along with what the discovery actually was. If a discovery was made after discovery powers were used the legality of those powers needs to be questioned.

When I completed my tax return for the pertinent years I deducted my tax and drawings as an expense. This was a mistake, but in the “other information” box and in an enclosed letter I made it very clear that I’d found the Self Assessment form confusing and I also gave a clear single column breakdown of which made it very clear of what I was doing.

No discovery can be made as I had made full disclosure.

I queried if a discovery had been made in December 2006 J Lamper replied, in a letter dated 10 January 2007, “I am unable to see where I have referred to discovery.” Which suggested to me a discovery had not been made. She later said that my questions about discovery were a “smokescreen”.

However in January 2007 J Lamper used discovery powers without completing the pertinent paperwork (as far as I can tell the paperwork was completed on 6 September 2007 - a full seven months after discovery powers were used).

In a telephone conversation of 22 February 2007 J Lamper said that discoveries had been made but she was - once again - unable to give pertinent examples, when pressed she refused to talk further about the matter.

While J Lamper failed to be specific about what discoveries had been made she was very specific about what her discovery was not. In view of my full disclosure in my tax returns she said, in a letter of 15 February 2007, “In this case I have taken the view that the words drawings, tax and entertaining shown obviously on the lists accompanying your earlier returns prevent me from having discovery in years earlier than 2003-2004.”

I agree with this: it was reasonable for me to expect my Self Assessment return to be read by a member of HMRC.

When J Lamper revised her figures in December 2007 she not only almost tripled the alleged tax liability, but she also changed the reason for discovery. Now arguing that the disclosure did not prevent her from making a discovery.

It’s reasonable to assume that the HMRC legal team didn’t feel J Lamper’s reasons for discovery were strong enough to go before a the Special Commissioner so she has now been forced to change her grounds for discovery.

The use of discovery powers in January 2007 was hasty, misjudged and illegal. HMRC should be sanctioned for failing to carry out the investigation in a correct manner.

If the new grounds for discovery are allowed, how do we address the use of these discovery powers at an earlier date? We must question if the use of discovery powers was legal.

I draw your attention to Langham v Veltema where it was concluded, “…the Inspector is to be shut out from making a discovery assessment under the section only when the taxpayer or his representatives… have clearly alerted him to the insufficiency of the assessment in question.”

The twin issues of figure variation and discovery need to be considered and decided upon by the Special Commissioner before we can meaningfully proceed further.

Means

It’s worth highlighting my means at this point. From what I can see the bulk of the tax HMRC is seeking is calculated by subtracting my earned income from that they estimate my outgoings are. As I’ve said many times in the past I’m married to somebody who is independently wealthy. There is no shortage of evidence that she was both in a position and did support me during the period in question.

I am prepared to take this matter to the Special Commissioner but it seems to be a waste of everybody’s time. If you can tell me what evidence would satisfy you that my wife paid the bills I will send it to you.


Sincerely



Nick Morgan

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