Tax Abuse And Insolvency

Tax Abuse And Insolvency

HMRC are currently awaiting the passing by Parliament of the latest Finance Act, which will give them a new weapon in their fight against tax abuse arising from insolvencies. 

HMRC have regarded for some time that insolvency laws are open to abuse and that this abuse has led to the loss of tax, whether it be VAT, corporation tax or PAYE. The Finance Act will now give HMRC powers to make directors and shareholders jointly and severally liable for outstanding tax liabilities. 

Thy will identify those in a company who have facilitated the tax loss. Be it someone who evades tax or facilitates tax avoidance, such as disguised remuneration schemes. 

Where HMRC believe an insolvency or the preparations for an insolvency have taken place to allow a company to avoid its tax liabilities, then HMRC can use their powers to make individuals personally responsible for the tax that the company owes. 

It should be stressed that the new regulations are aimed at what HMRC regard as serial offenders who have been involved in at least one prior insolvency where there were significant amounts of tax not collected due to the insolvency. 

If you are considering an insolvency at this time, especially due to the effects of Covid-19, please seek advice at the earliest opportunity. We here at Churchill Tax Advisers can advise you of the course of action you should take. Please call our dedicated number.

Royal Opera House

Royal Opera House

The Royal Opera House is a partially exempt trader who tried to make its overall input tax recovery including the costs of putting on productions attributable to the taxable supplies it makes. These are essentially catering and hospitality supplies made before and during productions. The Upper Tier Tribunal refused the link as they regarded the supply of the exempt production as the primary purpose of the opera House. Therefore, the production costs remained non-recoverable under partial exemption regulations.


For anybody operating a partial exemption method, expenditure must be correctly identified for the purposes of recovery of tax.

Offshore tax restructuring of business

Offshore tax restructuring of business

This client came to us following a recommendation by their own accountant for specialist tax advice. The client had a successful retail business including online sales. The existing business model meant that it was paying more corporation tax and VAT than it needed to. After thorough research of the legislation and HMRC guidance, we were able to propose a better business structure that would mitigate the corporation tax as well as VAT liabilities. Whilst majority of the tax planning was within the UK, the new structure also included elements of offshore tax planning which meant the UK corporation tax liability would be reduced.

Our analysis: The key for business growth is to have the right structure including a long term tax strategy. Once set up properly, the tax benefits can be reaped over a number of years bringing a significant return on investment for the specialist advice taken. We have come across a number of situations where businesses have grown without considering a long term tax strategy. The cost of then re-modelling a matured structure is usually quite high

Tax Investigation Closed Through Contractual Disclosure Facility (CDF)

This client came to us from Derbyshire and was already under a tax investigation for failing to disclose income. We considered the merits of the case and suggested that a full disclosure under Contractual Disclosure Facility (CDF) would be the most effective way to conclude matters in contrast to a lengthy exchange of correspondence with HMRC inspector resulting in tax and high professional fees.  The proposal was put forward to HMRC inspectors and they agreed to receiving a CDF. A full CDF submission was prepared and submitted which was fully accepted by HMRC. The tax and penalties payable as a result were quite minimal compared to what had initially been estimated. We are grateful to HMRC officers involved for their cooperation and support. Please click hereto view HMRC’s acceptance of the CDF and conclusion of the matter. 

Our analysis: This was an interesting case where our firm and HMRC worked in cooperation to bring an early and effective closure to a tax investigation. Had the conventional route of entering into prolonged correspondence and dispute been entered, this would have taken significantly longer and cost the client more in professional costs, tax and penalties etc. Although the CDF route may not be applicable in all circumstances but it is very useful to be able to identify the right strategy when approaching a tax investigation. 

Churchill Tax Advisers Help IHT Planning For Indian Born Clients

This query related to inheritance tax planning and came from an Indian born high net worth individual living in the UK for over 30 years. The client had a substantial estate in India and the inheritance tax position from UK perspective was not clear on these assets. Having researched the issue, we were able to advise that the deemed domiciled rules do not apply for individuals born in India and three other countries. This meant that provided certain conditions are met, there would not be any UK inheritance tax on assets based in India. The interesting part is that there is no inheritance tax in India so effectively (with careful planning), the Indian based assets can be passed to the next generation without any inheritance tax. This particular law is not covered by UK’s tax legislation and the source had to be verified to a double tax treaty with India from almost 60 years ago! This can open doors for tax planning for many wealthy Indian born individuals that have been living in the UK for some time. There are some traps for capital gains tax but once again with careful planning, this can also be avoided.

Churchill Tax Advisers Advise On Structuring For A Large Development

This case came to us from a firm of accountants in London and involved a large property development project. The issues at hand were how to mitigate potential inheritance tax, capital gains tax and income tax implications for the owners. Recent changes in the tax legislation on using structures such as limited liability partnerships created further complexities. We were able to put together a structure, in light of the new legislation, whereby our clients could achieve lower income tax liabilities as well as capital gains tax and flexibility to mitigate potential inheritance tax liabilities. By seeking specialist advice prior to the commencement of the development project our client can have benefits in the short and long term. Had this advice not been taken at this stage, there could have been significant tax implications for making any alterations due to the rise in the value of the property subsequent to the development work.