White Flag

New Tax Investigation Regime Launches Today

The Contractual Disclosure Facility (CDF) is a system by which HM Revenue and Customs (HMRC) will contact a taxpayer in writing to inform them that they are suspected of serious tax fraud and will offer them the ability to disclose the fraud formally within 60 days. If the fraud is disclosed, HMRC will agree contractually not to undertake criminal proceedings.

The investigation will then continue under civil law, with a settlement for tax, interest and penalties the result.

If a fraud is not disclosed and a criminal investigation does result, HMRC will have to build a criminal case. However, if successful the results are likely to be far worse, as imprisonment and the use of powers under the Proceeds of Crime Act 2002 to confiscate ‘criminal assets’ will be the likely result.

Disclosing tax fraud

Lack of Knowledge and Approval Invalidates Will

A recent case in the London County Court illustrates the vital importance of a testator both having the mental capacity to make a will and knowing and approving its contents.

Daphne Burgess was a widow with three children. In 2006 her health began to deteriorate and she suffered a series of mini-strokes. She also suffered from dementia, diabetes and arthritis.

In 2007 Mrs Burgess was taken by her daughter, Julia Hawes, to make a new will. They visited a solicitor with whom Mrs Burgess had had no previous contact and a will was drawn up cutting out her son. Mrs Burgess’s previous will had divided her estate equally between her three children. Mrs Hawes accompanied Mrs Burgess on her visit to the solicitor to sign the will, and may also have been present at the meeting when instructions were given to the solicitor drawing up the will, although he could not recall whether this was the case.

Despite the presumption implied by law that Mrs Burgess knew and approved the contents of the will, the court upheld her son’s challenge to its validity and overturned it. Mrs Burgess did not have the necessary mental capacity to make the new will and did not know and approve its contents.

The court also ordered Mrs Hawes, a magistrate, to repay a number of payments made from her mother’s bank account to her and her family, including payment for Formula One tickets for her husband. It was found that Mrs Burgess did not have the necessary mental capacity to make these payments.

Those caring for elderly people, and looking after their finances, should always be aware that their actions may be subject to scrutiny from other family members. Family members taking their elderly relatives to solicitors’ appointments to make wills should expect to be excluded from the interview as it is an important part of the solicitor’s job to ensure that the client does indeed know and approve the contents of the will, and that they are giving instructions of their own volition with no undue outside influence.

Government Considers Introducing Tax Lottery

The Government has floated the bizarre idea of running a lottery – with a £100,000 prize – for taxpayers who submit their tax returns on time.

Given that penalties of up to £1,600 can accrue for late filing of tax returns, clients struggling to meet the 31 January filing deadline may soon have an additional incentive to file their returns promptly.

It is expected that such a scheme would encourage taxpayers to file their returns earlier, leading to a reduction in the logjam faced by HM Revenue and Customs in January each year as taxpayers attempt to get their returns in ‘under the wire’.

Not all taxpayers are so tardy. It is reported that more than 100 taxpayers filed their 2010/11 returns online on 25 December.

Supreme Court Clarifies Approach to Property Disputes

There have been many cases over the years which have involved the determination of shares of ownership of a property when an unmarried couple have split up and wished to dispose of it, and there has been no formal agreement of the shares of ownership in it.

One such case was recently dealt with by the Supreme Court, which made good use of the opportunity it afforded to set out the principles to be applied in such cases. The Court stressed that each case will be determined on its own facts.
These are:[bulletlist]

  • In the absence of any express declaration of trust, the property owners will be considered to be ‘joint tenants’, so that each has full equitable ownership of the property (rather than each owning a defined percentage of the property);

  • This presumption can be challenged if there is evidence that joint tenancy was not in the minds of the purchasers when the property was purchased or that they formed a later intention to change their shares of ownership;

  • The common intention of the parties will be determined by their conduct;

  • Where it is clear that a joint tenancy was not intended on purchase or that the intention had subsequently changed, but it is not possible to ascertain by direct evidence or inference what the intentions were, then the court will rule that the owners’ respective entitlements will be what is fair depending on their entire course of dealing between them in relation to the property.[/bulletlist]

The Government is proposing to introduce legislation to clarify the respective rights of the owners in such cases. Until then, the best course of action if you are buying a property with someone else is to take professional advice and create a form of agreement to ensure the ownership is clear.

New Rights for Cohabitees Proposed

The Government has announced plans to introduce legislation to give legal rights of inheritance to long-term cohabitees.  There are currently more than two million couples living together who are not married or in civil partnerships.  Under current law, in the event of the death of either partner, the surviving partner has no rights over the estate of the deceased unless there is a will.

Since a majority of adults still have not made wills, there are numerous cases in which the death of a partner leads to a battle for their assets between their surviving partner and their relatives, who will inherit under the laws of intestacy. Often the surviving partner must make a claim for support under the Inheritance (Provision for Family and Dependants) Act 1975.

The current proposals are that where a couple has cohabited for five years (two where there are children), the survivor will acquire legal rights over the estate of the deceased.

Reforms are also suggested to the present law of intestacy – in particular the rule that in larger estates a spouse inherits a part of the estate in the form of a ‘life interest’ (the right to use of the assets for life: upon death, the assets pass on to the person next in line). The new proposal is that in such cases, the spouse will get half of the estate and the children or their heirs the other half. If the couple did not have children, the spouse will inherit the entire estate.

Making a will is the only way to ensure that your estate is administered efficiently and your assets are distributed according to your wishes.  Please contact us for advice.

The report overview can be seen here.

Beware of Fraudulent Rebate Emails, Warns HMRC

HM Revenue & Customs (HMRC) has issued a warning to taxpayers to be on their guard against fraudulent emails as the self-assessment deadline of 31 January approaches.

The ‘phishing’ email advises that the recipient is due a tax rebate and provides a link to a website very similar to HMRC’s own.  The recipient is then asked to provide their credit card or bank details.  Fraudsters then try to extract money from the account using the details provided.  Victims of the scam risk having their bank accounts emptied and their personal details sold on to other organised criminal gangs.

Joan Wood, Dire ctor of HMR C Online and Digital said, “We only ever contact customers who are due a tax refund in writing by post.  We currently don’t use telephone calls, emails or external companies in these circumstances.  If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.  “HMRC will do everything possible to ensure those people receiving this email know what steps to take to protect their information, and we are working closely with other law enforcement agencies to target the criminals behind this serious crime and see them brought to justice.”

Legitimate tax rebate forms (P800s) from HMRC will contain a payment order and will never ask for credit or debit card details.

In the last three months, HMRC has helped shut down 185 websites that were responsible for sending out fake tax rebate emails