Tax Carelessness: Mr Oliver And Mr Elliot Chat

Mr Elliot I have a client who is concerned about his tax return.

What happened to his tax return Mr Oliver?

He was careless.

Did he have too many parties and claimed the cheese and wine as a tax expense wholly and exclusively for the purpose of trading?

There you go off again Mr Elliot speculating about the question before it is even asked. Out of interest why can’t he claim the holey cheese as an expense?

Mr Oliver when was the last time that you picked up a copy of the Corporation Tax Act 2009? Was it err in 2009 by any chance?

Could have been because some of us want to have a bit of a life Mr Elliot. We want to read The Thursday Murder Club instead of tax legislation in our leisure time.

Can I recommend you read Fake Law instead? Much more civilised. You might learn something useful Mr Oliver.

Mr Elliot, please get back to the question. Let me refresh you on it before it completely evaporates from *my* mind. We know it has already gone from yours. Why can my client not claim the holey cheese as a tax expense?

Because Mr Oliver, had you read it you would know that such business entertaining is not usually tax deductible.

Very good Mr Elliot. Now my client has received a discovery assessment from HMRC.

And what did HMRC discover?

I already told you Mr Elliot – he was careless.

Very good Mr Oliver. Good luck with that.

Hang on I have not finished !!

Yes, Mr Oliver as you typically waddled off on one of your tangents, you omitted the essential ingredient as to what damage was done?

He entered into a tax avoidance scheme.

I have cautioned you Mr Oliver. I do not agree with your introducing any of our clients to tax avoidance schemes.

I didn’t introduce him to any tax avoidance scheme. Some other adviser told him it was a complete and utter no brainer.

Well, that’s alright then. Really and you believed him? And what about Rangers Mr Oliver?

Can we stick to talking tax. Keep football out of this.

No no no, Mr Oliver, good grief. You had better update your Continuing Professional Development immediately. Get yourself booked on a course today and please get yourself up to date. I just cannot fathom that you have not heard about the Rangers tax avoidance Employee Benefit Trust case.

When your frosty ventricles have thawed Mr Elliot, please note that the client had another tax adviser complete his tax return. Surely the client cannot have been careless?

You had better not complete his next tax return. We could be alerting our professional indemnity insurers and carelessness will not be the word that would sprout out of their mouth. Either get on that tax course today or you’d better pack your bags.

How can the client have been careless if he used a qualified tax adviser to do his tax return?

Under Sections 29 and 36 of the Taxes Management Act 1970 it doesn’t matter if your client used a tax adviser. What matters is if the error in the tax return arises from carelessness, no matter whether it was your client’s or that of your client’s then tax adviser.

I find this inconceivable and frankly remarkable. It cannot be right because if a client uses a qualified tax adviser, then a client is entitled to rely upon that person’s advice.

You can object all your like. In fact, you can shout from the rooftops but the legislation speaks for itself and the taxpayer has a duty to ensure that the facts presented to the adviser are 100% on the money.

Really?

Imagine if your client was sailing from Dover to Calais and he radioed the coastguard for directions after repeatedly misstating his position. He could hardly complain later if instead he sailed to the Isle of Siel could he?

I suppose.

A taxpayer is careless if under Section 118(5) of the Taxes Management Act 1970 he or she failed to take reasonable care to avoid the tax loss arising.

Thank you Mr Elliot, you are a lifesaver.

Now please get yourself on that tax course!! What would I do without me?