How the wrong advice can cost you £’thousands…
I'm always telling people it's so important to make sure you use a properly qualified professional for tax advice.
And here's a good reason why.
One taxpayer got a very unpleasant shock recently when she received an unexpected bill for hundreds of thousands of pounds relating back to a transaction that took place nearly 15 years ago.
So what happened?
Well, the taxpayer in question (Mrs R) sold some shares in January 2000. She then decided to reinvest the proceeds in another business.
On advice from her accountant, she didn't declare the capital gain from the share sales on her 1999/2000 Tax Return. HMRC later discovered there had been a share sale and issued an assessment to collect the tax due.
When Mrs R sold her shares, her (former) accountant telephoned HMRC for advice to find out whether the gains would qualify for rollover relief (and so no tax would be payable). He was told they did and so he didn't include the share sale on Mrs R's tax return.
So far so good.
However, there were two main problems.
1) The taxman's advice that roll-over relief was allowable on the share sale was wrong. Hardly surprising as it had been a brief and general telephone conversation with the accountant. And HMRC aren't legally responsible for advice they give out on the phone. Go figure!!
2) If the accountant had consulted the taxes legislation properly he would have known that share sales NEVER qualify for rollover relief.
Unfortunately Mrs R's accountant didn't appear to have done any careful research and overlooked an opportunity which would have allowed Mrs R to avoid a liability on the share sale and a nasty surprise from the tax man several years later.
Mrs R argued that she'd relied on her accountant for good advice.
The Tribunal were sympathetic to Mrs R's plight, even going so far as to agree that she had been 'ill-served' by her accountant. However they were unable to cancel the tax assessment.
Mrs R's appeal was therefore dismissed and she had to pick up a large tax bill.
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And remember, these tips are not a replacement for professional advice tailored to your precise needs and circumstances.