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Property Matters
This article first appeared in Asian Voice in November 2009. The biggest single area which gives rise to tax investigations is property, and this has been the case for at least the last 20 years. The reason for this is largely due to the rise in property prices, particularly in London, over the same period. Buying and selling properties has presented large numbers of individuals with the opportunity to make hundreds of thousands (and in some cases millions) of pounds. Where individuals build up property portfolios there is no particular problem provided that when properties are disposed of, tax is properly accounted for. For unincorporated property developers this is usually in the form of income tax, but for people holding property for medium or long-term investment this is Capital Gains Tax (with separate declaration of rental income). Whilst HM Revenue & Customs does devote considerable resource to ensuring that individuals who complete tax returns pay the full amount of tax, they are equally if not more interested in those individuals who seek to evade tax by using false names or offshore companies. They also track down so called 'ghosts' who try to remain off the tax radar by not completing a tax return and not declaring rental income, and/or profits from the sale of properties. Such individuals are sitting on a tax time bomb which in the worst of cases can lead to imprisonment. Horwath Clark Whitehill LLP recently helped a Mr Desai (name changed to protect his identity) with regard to a property transaction which had involved the purchase and development of a property in North London for a considerable profit. Mr Desai had arranged for the formation of an offshore company to carry out the development in order to evade tax in the UK. The directors of the offshore company did not make any decisions, had no involvement in the purchase, development or sale, and were to all intents and purposes only there to rubber stamp the decisions made by Mr Desai in the UK. The case was taken up for investigation by the Civil Investigation of Fraud Office who stumbled on the development following an investigation into the tax affairs of the builder. There was clear evidence in the case that Mr Desai had dealt with all matters involving the builder, the solicitors and the bank that financed the purchase and development costs. Additionally, there were heinous features such as requesting that the directors of the offshore company despatch letters drafted by Mr Desai on offshore company headed notepaper. Mr Desai also asked the offshore directors to sign blank cheques which he could distribute to service providers in the UK. There was therefore a very real possibility of HMRC prosecuting Mr Desai either under the 1968 Theft Act or the common law offence of 'cheating' the Exchequer. Horwath Clark Whitehill LLP was, however, able to negotiate protection for Mr Desai. They subsequently carried out a thorough review not only of this transaction but a number of others. The end result was that Mr Desai was not prosecuted and only had to pay his arrears of tax, interest and a monetary penalty. Managing tax disclosures of this kind is a very specialised area and Horwath Clark Whitehill LLP is one of a small number of firms who have 100% dedicated expertise in this area. If you require any assistance in making a tax disclosure to HM Revenue & Customs or you wish to make a disclosure to HMRC under the current New Disclosure Opportunity (where deadline expires on 30 November 2009), you may wish to telephone Sean Wakeman on 020 7842 7285 or Anand Unalkat 020 7842 7143 for a free initial consultation. Alternatively you can call our helpline on 020 7842 7200 or complete our enquiry form and one of our experts will contact you. |
