Case Studies

• Mistake when filling in a tax return
• Who is self employed and problems with IR35
  
• Unexpected bill follows PAYE visit
  
• VAT visits

Tax Return mistakes

Joe was a taxi driver. His financial records were fairly straightforward: he received fares from his customers, and paid for his car, his radio, fuel, and the running expenses. For many years, he had used an accountant to prepare some accounts and fill in his tax return, but decided to complete his own 2004 tax return. It appeared to be quite a simple process, and would save paying the accountant's fees. When he received a letter from HM Revenue and Customs confirming they had received his tax return and that there would be no adjustments, his decision looked to have paid off.

About a year later, Joe called Tax Champion. He had received a letter from the Revenue that said they wanted to open an enquiry into his tax return. The letter asked questions about capital allowances and private proportions. He faxed us a copy of the letter and we rang him to discuss it. It was clear to us that he had made some basic errors on the return.

Joe had not tried to pay less tax than he should; all the income and expenses were properly recorded on his return. The mistakes he made were due to not understanding that the payments he made for his car included interest, and that this was all he could claim; the cost of the car is written off over a number of years and needs to be claimed in a special way; lastly, the car was used from time to time for private journeys, so an adjustment had to be made for that. After a few letters and calls, the problem was resolved and, although he had more tax to pay, he was pleased that the worry was taken away.