HMRC’s Tax Dispute with Squibb Group

Squibb Group’s clash with HMRC stands as a cautionary tale illustrating the consequences of alleged tax irregularities. The firm faced accusations of improper payments by its directors, supposedly using company funds for personal expenses. The subsequent imposition of a hefty charge and allegations of underpaid taxes spanning several years led to a winding-up order by the High Court. Squibb Group denies these allegations and had appealed to the First Tier Tribunal (Tax Chamber) prior to the winding-up.

Our Taxation practice is at the core of the firm. Got a dispute with HMRC? Our tax team is made up of specialist tax lawyers who can assist you to resolve your tax dispute. Our ex-HMRC lawyers will guide you on complex tax legislation to get you the best possible result.

Understanding the Troubles Faced by Squibb

The case of Squibb Group underscores the complexities and potential pitfalls of managing finances, especially in relation to tax compliance. Their alleged misuse of company funds for personal expenses, improper expense claims, and disputed deductions for business expenses served as the catalyst for HMRC’s pursuit.

HMRC’s court submission contested the assertion that certain payments were exclusively for trade purposes, expressing disbelief in their legitimacy as genuine business expenses due to insufficient evidence. Additionally, HMRC questioned the authenticity of some submitted invoices. The tax body’s assessments span from 30th June 2003 to 31st January 2015, encompassing corporation tax and VAT sums. HMRC provided a detailed list to the court, highlighting over £4 million that directors were purportedly deemed to have inappropriately extracted or spent. Furthermore, HMRC hinted at potential additional claims, linking to their allegations of the company incorrectly claiming deductions for business expenses and understating its income.

HMRC’s Allegations against Squibb Group

HMRC’s investigations pointed to various discrepancies in Squibb Group’s financial dealings, including allegations of:

• Improper Cash Extraction: Former directors allegedly withdrew cash from the company for personal reasons, not duly recorded in the director’s loan account.
• Misuse of Company Funds: Company finances were purportedly used for personal and private expenses, involving extravagant costs such as constructing a home swimming pool with a slide and a lavish family holiday at the Gleneagles Hotel, invoicing a staggering £31,771.50.

HMRC challenged these expenses, contending that they were not exclusively for trade purposes and lacked substantial evidence to validate their legitimacy as genuine business expenses. HMRC’s assessments, spanning from 30 June 2003 to 31 January 2015, encompassed corporation tax and VAT, totalling more than £16.5 million.

HMRC is pursuing an additional amount of £1,654,771.63 from Squibb Group concerning PAYE, National Insurance, student loan repayment, and Construction Industry Scheme payments that the tax body alleges the company did not fulfill.

Squibb Group’s Defence and Ongoing Dispute

Squibb Group vehemently refuted these claims, contesting the assessments and penalties imposed by HMRC. Despite appeals and reviews against HMRC’s findings, Squibb Group faced increased assessments and penalties, prolonging the arduous nine-year-long dispute. The company continues to appeal to the First Tier Tribunal (Tax), aiming to challenge HMRC’s allegations, asserting that the tax investigation has created immense strain on the firm and its stakeholders.

How we can help your business appeal to the FTT

The procedural rules governing the First Tier Tribunal are found in the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273). The Tax Tribunal is completely independent of HMRC and is governed by an overriding objective to deal with cases fairly and justly (rule 2, First Tier Tribunal Rules (FTR 2009)). The Tribunal will consider the evidence of both parties, equally whilst the judge heavily relies on previous case law. We can lodge an appeal to the First-tier Tribunal (Tax Chamber) on behalf of your business against HMRC’s penalty decisions by taking the following steps

1. Initiating the Appeal: As a business, if you disagree with a decision made by HM Revenue and Customs (HMRC), the initial step is to file a formal Notice of Appeal with the First-tier Tribunal (Tax Chamber). This notice must articulate the grounds for the appeal, specifics of the decision being challenged, and include any pertinent supporting evidence.
2. Adhering to Time Limits: Ensure strict compliance with the appeal time frame, typically set within 30 days from the date of HMRC’s decision. Missing this deadline might jeopardize the eligibility of the appeal.
3. Completing the Appeal Form: Businesses need to complete the relevant appeal form pertinent to the tax matter under dispute. These forms are accessible on the Tribunal’s official website or obtainable directly from the Tribunal office.
4. Presenting Grounds for Appeal: Clearly articulate the reasons for disagreement with HMRC’s decision. This involves providing strong arguments and substantial evidence to bolster your case. Essential documentation, financial records, and correspondence exchanged with HMRC should be included to support your claims.
5. Thorough Case Preparation: Devote significant effort to prepare for the tribunal hearing. This encompasses collecting and organizing supporting documents, preparing comprehensive witness statements, and arranging legal representation, if deemed necessary for a robust defence.
6. Participation in Tribunal Hearing: The case will be heard before a judge at the First-tier Tribunal (Tax Chamber). Both the business (appellant) and HMRC will present their respective cases, provide evidence, and offer arguments. The judge will impartially assess the evidence and arguments before issuing a decision.
7. Receiving the Tribunal Decision: The Tribunal will deliver its decision in writing, outlining the verdict and rationale behind it.

Protecting Your Business

To prevent finding yourself in a similar predicament, here are crucial steps to consider:

1. Transparent Financial Records: Maintain clear, accurate financial records that adhere to tax laws. Ensure personal expenses are distinct from company finances.

2. Compliant Expense Claims: Scrutinize business-related expenses meticulously. All expense claims should be legitimate and directly connected to business activities.

3. Vigilant Compliance: Regularly review tax submissions to ensure accuracy and compliance with HMRC regulations. Timely rectify any discrepancies or errors identified.

4. Seek Expert Guidance: Consult tax professionals or legal experts to ensure your business operations align with tax laws. Experts can offer invaluable insights and prevent potential pitfalls.

What Sets Us Apart?

1. In-Depth Knowledge: Our seasoned team possesses a comprehensive understanding of tax laws, regulations, and HMRC’s protocols, enabling us to craft robust legal strategies tailored to each unique case.

2. Proven Success Stories: We pride ourselves on a stellar track record of achieving positive outcomes in tax disputes. Our history of securing favourable resolutions for clients stands testament to our commitment and expertise.

3. Tailored Legal Solutions: Every case is unique, and so are our solutions. We provide bespoke legal guidance, meticulously tailored to address the intricacies of each dispute, ensuring our clients’ interests are protected.

4. Vigorous Representation: When it comes to litigation, we advocate fiercely on behalf of our clients, leveraging our expertise to navigate legal proceedings and pursue the most advantageous outcome.

Expert London Tax Lawyers

We understand the stress and complexities surrounding tax disputes. That’s why, at Lexlaw, we are dedicated to partnering with our clients, guiding them through the intricate maze of tax regulations, and tirelessly working towards achieving the results they desire.

We have years of experience negotiating with HMRC and handling tax appeals at the Tax Tribunals and in the High Court dealing with contentious tax disputes. We also work extensively with Accountants, Tax Investigation practices and former HMRC Officers to ensure your matter is handled correctly. The depth of our combined capabilities allows us to represent clients in a variety of situations, whether advising private or corporate clients during tax audits, pursuing administrative appeals, or litigating tax matters at the Tax Tribunal, Court or in tax appeals. Clients hire us because of our extensive experience in all areas, and especially because of our litigation experience – when necessary, we know when to go to the Tax Tribunal and we know how to litigate.