A tax inquiry can drain your time and energy. You need to provide evidence to support your case, and often, the proof goes beyond your financial records. Our Senior Advisor, Paul Aplin OBE, experienced such a situation with a client.
As a renowned tax writer and commentator, Paul shares the story of an elderly client. They had to find supporting evidence for a domicile inquiry, with HMRC seeking information beyond the client’s financial footprint.
Gathering supporting evidence like this can take time. But it can also feel intrusive and cumbersome – something we here at Daysium want to prevent.
A few days ago, I drove past a house I haven’t seen in years. It was once owned by an elderly client, a very orderly man whose financial record keeping was immaculate. Unfortunately, some of the most important information I needed to establish his tax status related to non-financial matters – and in respect of those, his records were very different.
Ringing the bell as I arrived for our first meeting (on the stoke of 8.30 am as I had been warned he was a stickler for punctuality) I was surprised to be kept waiting for several minutes before the door was opened. Franz was wearing a dressing gown and looked at first perplexed, then mortified as he realised that had forgotten our meeting. He ushered me in and gave me the newspaper to read while he dressed, emerging a few minutes later immaculately turned out and carrying a pot of tea.
His tax affairs were, he thought, very simple and I told him that his records were the most organised I had ever seen. His concern was over a letter from HMRC asking some questions about his domicile. He could not understand why this was an issue or why some of the questions in the letter were, to his mind, both intrusive and deeply personal. He had a letter from a few years earlier conforming his non-domiciled status but had not appreciated the fact that it could – and would almost certainly – be questioned again.
Some of the questions were easy to answer, simple matters of fact or points that that were well documented in his impeccable filing system.
Others were more difficult. He had for example destroyed old insurance policies and evidence of membership of social and sporting bodies.
One particular item sticks in my memory, partly because of the incredulity it prompted: “personal correspondence and photographs to help me understand your background, lifestyle and future intentions”. He was equally offended by a question regarding his religious, cultural and social connections. “How far,” he asked “can they intrude on my private life?”.
Ultimately, we did find enough information to satisfy HMRC and to close the enquiry. I warned Franz to keep all of the documents we had gathered and suggested others to keep in future, as I strongly suspected that the issue would be raised again within a short time. Neither of us wanted a repeat of the intrusive, time consuming, stressful and disruptive evidence-gathering exercise we had just been through.
That call to action proved, however, to be redundant as Franz died the following year.
A charming, fascinating and meticulous man who reinforced in my mind the importance of understanding that not all documents relevant for tax are financial – and of ensuring that they are identified and kept securely in anticipation of the day they may be needed. Knowing the client as a person makes it far easier to guide them through the tax labyrinth.
Facing an enquiry can feel daunting. The process can be time-consuming and expensive. But it’s also a reality many globally mobile people must be prepared for.
Our aim is to remove uncertainty and strengthen your records in advance. As Paul wrote, “not all documents relevant for tax are financial.” With our app, you can log evidence like photos and your location data securely. These can be valuable if you’re facing an audit. With the evidence, you can prove reliably your day count is correct. Most importantly, your data is secure and you have full control over it – at all times.
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