HMRC pursues Iceland for tax underpayments

UK frozen food specialist Iceland has slammed HMRC over the £21 million tax bill that it has received over its employee Christmas saving scheme, and HMRC’s further pursuit of the matter during the Covid-19 crisis.

What has Iceland been accused of?

Over Christmas, Iceland had a voluntary scheme allowing members of its floor staff to save money from their wage for the Christmas holiday period, which could then be returned to them on demand, usually before Christmas. However, despite Iceland staff voluntarily setting aside the money on a temporary basis, HMRC has claimed that the pay they received from Iceland fell below the minimum wage.

What action has HMRC taken?

HMRC handed Iceland a £21 million bill at the beginning of the year, on the basis that there had been an estimated £3.5 million underpayment for each of the six years of the scheme. Furthermore, in the past month, HMRC has requested payslips and further information from Iceland as part of its investigation.

How has Iceland responded to the allegations?

Sir Malcolm Walker, the founder of Iceland, has responded to HMRC in a letter stating “I don’t know what planet you and your colleagues are living on, but in case you haven’t noticed here on Earth we are in the midst of an unprecedented global crisis.

“I think you and your teams would be far better employed helping furlough payments come through instead of spending your time harassing companies that are hard at work feeding the nation on an absolutely ridiculous technicality. I think you should be ashamed of yourself in continuing to pursue this matter.”

Sir Malcolm also added that the company currently had 3,000 employees on sick leave with full pay and a further 1,200 vulnerable staff taking 12 weeks’ leave on sick pay to avoid possible infection. The company expects that it will face £20 million of additional costs due to the pandemic.

An HMRC spokesman said: “We don’t discuss identifiable businesses. We understand that businesses are facing unprecedented challenges. Many of our minimum wage teams are working to deliver the vital support schemes the government has put in place. HMRC’s priority is to support employers and workers during this time.”

How will you know if you are subject to a HMRC investigation?

HMRC will notify a taxpayer in writing when it commences to examine their tax affairs. Typically, if HMRC starts a formal civil investigation, a letter will be sent requesting more information. For example, a taxpayer may receive a request for information on a property transaction or further information about a tax return from a local compliance audit.

However, if HMRC suspects criminal VAT fraud or high amounts of tax evaded then it may commence criminal investigations. Typically, unlike for a civil investigation, HMRC are unlikely to notify you at the start of the process but instead you will either be informed once you receive a letter requesting attendance to a voluntary interview under caution or when you are arrested.

It is crucial that, once under review, specialist Tax Investigation Lawyers are instructed. We regularly liaise with HMRC at formal meetings, agree what the scope of the disclosure should be and prepare the report on your behalf and reach a civil settlement with HMRC.  We have wide-ranging experience in assisting those facing a COP 9 investigation whilst helping to navigate the rigid time-limits and strict rules.

How long will a tax investigation last?

It depends on the scope and nature of the HMRC investigation. The opening letter issued by the HMRC is usually a good guide on the potential length of any investigation. Some tax investigations finish after one letter; other investigations can take months with HMRC consistently requesting more information; and some investigations can be extending to longer than a year if involving complex tax structures or large businesses.

It is important to engage professional advice early on to minimise the length of any investigation as we identify any problems quickly and efficiently to get to the heart of the matter.

Expert London Tax Investigation Lawyers

If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigate process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide urgent advice and representation to clients from our unique expert team of established Tax and Duties specialist solicitors and barristers with a proven track record of delivering authoritative results. Just call us on 0207 1830 529, or email [email protected].

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