Anonymous or otherwise – tip offs to HMRC

Anonymous or otherwise- tip offs to HMRC can result in costs traumatic times for clients and their everyday lives!

Believe me, cases involving wives having written to HMRC informing on their errant husbands’ tax extractions can seriously back-fire in more way than one.

If they trade as a limited company and the case is large, the wife may well be a director. Should the case be taken up for a COP9 suspected fraud investigation, then the wife is likely to be implicated as much as the husband and called in for an interview with HMRC.

Furthermore, in limited company cases should any cash extractions be discovered, or other sales understated, then the case is invariably settled by increasing the turnover figure and thus the profit assessable and making a corresponding adjustment to the directors’ loan account.

This almost always puts the directors loan account in deficit. Therefore, not only the corporation tax becomes payable but there is also a charge under Section 455 on the overdrawn loan account until it is repaid. This is a double whammy for limited companies and many people forget about the directors’ loan account charge.

Both will be subject to interest and penalties.

Therefore, the company itself will suffer heavily and the director will not be called upon to settle the tax personally with HMRC. This will of course affect the company and consequently the wife.

In divorce cases if an investigation can, be concluded prior to the financial settlement being agreed, there will be a serious depletion in the funds and company valuation to be shared between them.

Likewise, if one partner has a grievance against the other and advises the Revenue about undeclared rent, then if the property is jointly owned by a husband and wife the rent is always accessible on them on a 50-50 basis.

One partner in the marriage cannot pass the rent over to the other party.

There is only one exception to this when there is a genuine different split of the beneficial ownership of the property. This is where a married couple they own the property as tenants in common on say a 25/75% basis. Provided you have a deed of trust in place and the money is paid to each in unequal shares then HMRC they accept a different split of the assessment to tax. This requires each party to the marriage to complete an HMRC Form 17.