Tax office chasing me

[GreatAuk]

Maybe I do have a bit of a biased view of them I suppose, and that is good if they have improved recently (the negative interactions which people I know have had were quite a while ago now I think).

Although if people have been a bit creative with taxes and then think they've too clever / stubborn to have to make things right then they deserve everything they get from HMRC!

 

[Kemik]

Well that is good if loopholes like that are a bit tighter now then. And I can well imagine that it can be far from black and white in some cases, particularly for big multinational groups - and that seems like a huge failing on the part of our leaders to me, and agree it's not really HMRC's fault. Their attitude to those that don't have expensive lawyers to defend them is their fault though.

I can well imagine that it would cost a huge amount to take every big company to court and it would take ages, but that doesn't mean they won't threaten the little guy with it! I know a couple of people who have had horrifically threatening letters from hmrc demanding X £s or else they'll be taken to court, on what turned out to be completely incorrect information. There's clearly a cultural problem at the very least of they think its acceptable just to threaten people out of nowhere based on completely false information.

That seems like a big problem to me, that big multinationals may get away with things because it's complicated, or it would be really expensive and time consuming to prosecute them, meanwhile an ordinary citizen or sole trader will get threatened with court at the first opportunity, regardless of whether there's any actual evidence of wrongdoing.

I really hate the term loophole. It suggests the Government created some little bit of legislation to allow people to simply pay no tax, or that they know of an error and aren't fixing it. In reality, what Government would want that kind of bad press?

HMRC has limited resources and uses a risk rating system to classify each taxpayer. The process is clearer for large corporates and a review takes place every few years. The higher the risk, the more frequent the audit. Low risk may not even get audited at all unless an error is spotted. HMRC use a lot more technology these days and are often ahead of the tax payer in spotting errors with things like VAT returns, tax returns and customs returns.

The issue you're referring to is transfer pricing. I.e. two companies in different countries owned by the same group and how should they price their goods between the companies. Historically the price has been determined by looking at what third party companies charge. However, this is a range of results and you look at averages. Yes, historically some large multinationals have used transfer pricing rules and pushed them to the limit of the ranges to suit their needs or abused differing tax law between countries to become tax non-resident anywhere. The past five years have seen huge changes in this field with Governments working together to address this through the OECD. You tend to find it is the largest groups that are the ones who have the resources, investment in efficient systems, etc to be able to structure themselves in a way that took advantage in the past. The US groups are still quite aggressive but tax authorities have tended to be aggressive back because of pressure from the media and politicians. It really isn't about "getting away with it". It's a very difficult, grey discussion around which part of that range of third party prices is "right" based on the facts of the transactions taking place. These days you can't just create a holding company in the Netherlands with no staff and pay little to no tax.

From my experience with small, owner managed businesses, people make mistakes and HMRC are generally pretty happy to allow you to fix it. It's only where you are negligent that the fines come out. E.g. don't file a tax return on time.

 

[Mr_Cool]

I got an underpayment letter last year, didn’t end up paying it until last month.

Then a week or so ago I got an overpayment letter

So got my money back and more.