Doesn't the taxman trust tax advisers?

A recent Special Commissioners decision contains a number of important lessons for accountants and tax advisers as it effectively revolves around the issue of whether HMRC believe assertions made by accountants.

You can access the full facts and details of the case of Mr M Ransom v Revenue & Customs [2008] UKSPC SPC00708 if you have time to read them. If you do and you have any further observations, please add them by way of comments to this blog post.

The only matter on which the Special Commissioner had to reach a decision was whether an amended tax return for 2000/01 had been filed before the effective deadline of 31 January 2003. The taxpayer's accountant claimed that the return had been hand delivered to the Woking Tax enquiry office on the evening of Friday 31 January 2003. The Revenue however argued that the amended return was posted to the office and did not arrive until 7 February 2003.

For the record the return was being amended to reflect the decision in Mansworth v Jelley. This was only published in December 2002. And let's remember that many accountants and tax advisers were under extreme pressure in January 2003. Everyone was trying to complete the necessary amendments and claims for clients who could benefit from the Revenue's published interpretation of the implications of the decision.

Returning to the present. What are the lessons that accountants and tax advisers can learn from the Ransom case?

1 - As I have recorded on this blog before (in the context of discovery assessments), it is crucial to be able to evidence all statements that are to be made before the Commissioners. There will be no second chance to represent the evidence;

2 - It is risky waiting until 31 January to file paper based tax returns and amendments to tax returns. Given the new 31 October deadline for paper based returns this issue is less likely to recur;

3 - The time lag between the start of a dispute or a challenge with HMRC and the case reaching the Commissioners can be years. In this case the argument started FIVE years ago. And this was a relatively straightforward question: When was the amended tax return filed?

4 - If HMRC have reason to question your honesty or your judgment they will pursue the matter. Ultimately the Revenue's position in this case effectively impugnes the character of the accountant in question;

5 - Even when you are in the right, do not under estimate the time and effort that will be required to produce all necessary evidence to support your contentions. In this case the accountant and four colleagues all gave evidence to counter the Revenue's challenge;

Do you have any observations about the implications of this case? Please add your comments to this blog post.