Professional ethics

[king_pellinor]

I'm busy arguing   having an interesting technical discussion   arguing with one of Her Majesty's Inspectors of Taxes.

I won't go into detail, but he thinks we've deliberately inflated the value of a building built by one company for another, so the buyer gets lots of lovely tax relief.  He wants to knock £2.4m off the sales value, which will mean the buyer pays £250k more in tax over the next few years.

I keep telling him he's wrong.  The complication is that in any case if we do what he says the seller will pay £750k less tax now.

He's just insisting that he's right, and isn't looking beyond the buying company to look at the overall picture.  In essence, he wants one bird in the bush, and is prepared to give us three birds in the hand to get it.

He is indubitably wrong, if you bother to read the legislation (in his last letter he had the gall to say "I think section X is less relevant, and what we should be looking at is section Y" - which I heartily agree with as that is exactly what I told him in my previous letter!) , but of course legislation means what the parties agree it to mean - the courts only resolve disagreements.

How long do I have to keep refusing this gift, and how hard to I have to fight?  Bear in mind that it's not my money, it's my client's.

Comments

[bunn.livejournal.com]

Is there a downside to just agreeing with him and letting your client take the money and run...?

[king-pellinor.livejournal.com]

Yes: he's wrong! :-)

Also, it would mean me conceding that I'm wrong. I'm happy to do that as long as everyone realises I'm only pretending :-) - but then, the whole point is that I think we Tax Advisors are here to make sure people pay the right amount of tax. That usually means a smaller amount than HMRC think, but I'm not in the business of advising clients to not pay tax that I genuinely think is due.

[purplecat]

What happens if someone decides at a later date he's wrong? could you be letting your client in for a sudden (possibly punitive) tax demand in future? if so, I'd stick it out. If not I'd shrug and say "the government decided it should be this way, I did everything I could to point out I thought it should (according to their own rules) be the other but at the end of the day it's their legislative system."

I'm not clear on what's going on here but is money actually changing hands between these two companies? if so doesn't the seller have an opinion about being told to sell it for less than the buyer is prepared to pay? or is this one of those obscure, this is what it would be worth if we were putting it on the open market, which we're not, type situations.

[king-pellinor.livejournal.com]

There is a risk that another Inspector could revise the view, but we shouldn't be any worse off in that position. HMRC will be in a poor position to impose penalties for wrongdoing where we've explicitly discussed the point and followed their decision.

Money did change hands - this is one of those situations where the authorities say "We'll ignore what you actually did, we'll pretend that you did it on the open market - and, being career civil servants, we know all there is to know about commercial realities".

[helflaed.livejournal.com]

Can you try acceptance with some weasel wording along the lines of "In the interests of bringing the matter to a resolution we are prepared upon this occasion to accept X on a without prejudice basis"?

[purplecat]

Take the gift. You've done the right thing in drawing their attention to the matter. They, as official arbiters, have disagreed - financially in your favour as it happens. Accept under protest.

[evilmissbecky.livejournal.com]

Take it to your supervisor. Let it be his call. That way you can say you did everything you could...but ultimately the final decision is out of your hands and not on your conscience.

[philmophlegm.livejournal.com]

Is there a Tax equivalent of DPP? If you were in Audit, and you wanted to get a definitive answer to a technical accounting question, you'd ask someone in DPP A&R (Department of Professional Practice - Accounting and Reporting) and if you wanted to get a definitive answer to an audit methodology question, you'd ask someone in DPP Audit Support (me, for example). You would then (in theory) record the discussion in the audit file because auditing standards require you to and just in case nasty people* want to look at your audit file.

* Nasty people in this context meaning either:
a) Quality Performance reviewers (our internal quality control teams, run - essentially - by me)
b) Our regulators (either the AIU or the QAD)
c) The courts (if something went badly wrong!)

So, to summarise:
Send email. Print out receipt. Apply to a) tax file and b) your arse (to cover it).

[tovaglia.livejournal.com]

Dunno, but an interesting ethical problem indeed. I'd be interested to hear what you eventually decide to do.

[king-pellinor.livejournal.com]

Oh, absolutely. I was just wondering what other people thought, out of interest.

[king-pellinor.livejournal.com]

We've gone back arguing strongly against his suggestion, and pointing out the implications in very small words. If he insists, though, he insists.