Sarah Woodall succeeded in bringing an HMRC enquiry into the disposal of employment-related securities to an end within months of her appointment, after over three years’ correspondence with HMRC on the same issue and saving her client £350,000.
After its tax investigation, HMRC sought to impose an income tax liability on Quintin Heaney under s446X Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), which can apply where there is a disposal of employment-related securities for consideration above market value.
This would have resulted in £1.7m of the total sale price being charged (incorrectly) to income tax , plus uncapped NI, interest and penalties, which HMRC also said it wanted.
The matter was referred to HMRC’s expert Shares and Asset Valuation team (SAV) which did not help, and led to unprecedented delays and extensive, highly technical and ultimately unhelpful correspondence being exchanged over the years, described by one professional adviser as “just spurious”. In the end, HMRC’s investigating officer distanced himself from the arguments SAV had put forward.
By progressing an ADR application, negotiating and presenting HMRC with comprehensive evidence previously presented but overlooked by HMRC, Sarah Woodall was able to highlight fundamental flaws in HMRC’s arguments. Furthermore, she was able to show that the actual market value of the shares was much closer to the sum Mr Heaney received than HMRC’s estimate. (HMRC’s estimate was about 400% out.) Ultimately, and after a review by an independent HMRC officer, HMRC agreed not to pursue the matter further.
Mr Heaney said: “Many thanks to Sarah indeed. I had been expecting the matter to continue dragging on, so it is great news that it is finally resolved! Sarah’s persistent approach worked. I’m delighted.”
Sarah said: “Mr Heaney has been incredibly patient when at times HMRC seemed unprepared to listen or to even consider key evidence. I am delighted his patience finally paid off. £350,000 is a lot of money and the tax was not properly due.”
“HMRC already had the tax (through PAYE) and arguably were more inclined to be difficult, as it was a refund that was being claimed, hence an outward flow of cash from their coffers.”