HMRC target Barristers – are you being “discovered”?


As barristers are self-employed and declare income on a self-assessed basis, there is much more scope for HMRC tax investigations and being prosecuted for not paying their VAT liabilities. Concerned though the Bar Council might be, this is happening and deliberate failures to submit tax returns and/or income omissions may not just be a tax issue.

Time to call in a tax investigations specialist?

HMRC tax investigations are intrusive, in addition, when involving barristers this can impact the time they can spend working, as well as occupying disproportionate amounts of the clerking and administration teams’ time, making external expert support and strategic direction from the outset invaluable. Often HMRC operate on risk and suspicion. Investigators are reluctant to reveal their case, so not enough information is released to advance matters from the taxpayer’s side. However, if HMRC commit to the civil route the position with HMRC is regularised by agreeing a contractual financial settlement.

Has HMRC made a Discovery?

Discovery tax assessments are regarded as the final weapon in HMRC’s armoury to correct an insufficiency of tax. The presumption of finality in self-assessment is in favour of taxpayers and the restrictions for issuing discovery assessments reflect that, in cases where enquiry windows have been missed, HMRC have hurdles to overcome if they wish to disturb the finality of a taxpayer’s self-assessment. A discovery assessment is the final leg of the process to rectify a potential loss of tax.

The validity of a “discovery assessment” is raised under the provisions of section 29 Taxes Management Act 1970, but often subject to statutory conditions such as the following discrete issues:

  • Was there a discovery (within the terms of section 29(1))?

If so,

  • Was the situation “attributable to fraudulent or negligent conduct on the part of the taxpayer …” (as required by section 29(4))?
  • If the discovery assessments were validly made, was HMRC entitled to issue assessments outside the standard four (carelessness by taxpayer or agent), or six-year limit (deliberate/fraud)?

The burden of proof for each limb falls on HMRC. As HMRC tax assessments are just numbers they do not explain and cannot explain the basis on which there is “an additional liability” to tax. HMRC has to explain the reasoning for making the discovery assessment and by doing so the investigator reveals his/her case.

In short, section 29(1) provides HMRC with the right to raise an assessment (commonly referred to as a “discovery assessment”) if a situation (within the terms of s. 29(1)(a), (b) or (c) and broadly described as a potential loss of tax) is the subject of a “discovery”. However, it should be noted that the required level of an officer’s knowledge regarding the potential loss of tax is relatively low: there must merely be a reasonable basis for the belief that there is such a loss1 – there does not need to be a legal or factual certainty at the time that the assessment is made.



1Authority for it can be found in R v Commissioners for the General Purposes of Income Tax for Kensington, ex parte Aramayo [1913] 3 KB 870 at 889. 2Authority for it can be found in Lansdowne at [69].

 Suspicions of tax fraud – What is HMRC Code of Practice 9?

If HMRC suspects fraud or dishonesty, as an alternative to a criminal investigation the Code of Practice 9 procedure is used with the Contractual Disclosure Facility (CDF). This is an opportunity to disclose all material irregularities in return for a guarantee that HMRC will not prosecute. Generally, a CoP9 Disclosure cannot later be used in evidence against the taxpayer in criminal proceedings.

How does HMRC Code of Practice 9 work?

CoP9 CDF can only be offered by senior HMRC FIS investigators. Given its complexities and forensic approach, independent specialist tax investigation advice should be sought, often in addition to the accountant’s advice as such investigations are relatively rare. HMRC’s own CoP9 literature recommends:

“You are strongly advised to seek independent professional advice. If you already have an appointed adviser you should contact them immediately. However, many people find it helpful to appoint a specialist adviser who is familiar with COP9, as well as their regular adviser.”

 CoP9 Case Study – the busy barrister

The following is a real FIS intervention matter where Tax Networks Ltd was engaged to advise a barrister after receiving a CoP9 letter.


  1. The barrister had many years of practice involving complex law and was consumed by the rigours of day to day practice, involving long and irregular hours. As with most chambers, the barrister’s work was sourced and managed by the clerks. The barrister and clerks would generally quantify all fees and in turn inform the accounts department to send out invoices (inclusive of VAT). Payment was then processed by bank transfer net of the barrister’s chambers’ expenses. Apart from accrued bank interest, there were no other sources of income.
  2. Over time, and due to the challenges of the barrister’s practice, a range of sequential administrative failings gradually developed; delays in the barrister notifying chambers’ accounts department to raise invoices; failure to file Income Tax and VAT Returns on time; and these breaches continued over the course of several years.
  3. In early 2016 the barrister received a letter from HMRC asking for clarification of fee payments. Rather than obtaining specialist tax advice, the barrister directly contacted the chambers’ accounts department, obtained the historic earnings details which were then passed on to HMRC.


  1. Following review, HMRC sampled and evidenced the tax periods establishing longstanding and repeated Income Tax and VAT compliance failures. HMRC found that the barrister had financially benefited, as the consequential tax shortfall was substantial, HMRC had been prejudiced.


  1. Several months followed and despite the first hint of HMRC activity, the years of tax compliance failures were not rectified and the tax defalcations continued.
  2. The barrister received a FIS CoP9 “suspected serious tax fraud” letter.

Tax Networks Support

  1. Tax Networks was engaged to produce a Report under CoP9 CDF and negotiate an exit by way of a civil financial settlement with certificates of full disclosure.

Warning Signs

Below are some practical tips to help avoid a tax investigation: –

  • Develop an effective invoicing system and authorise chambers to provide monthly financials to an accountant to prepare robust records and timely Returns;
  • Beware of Accounting Mechanics: Avoid incorrect calculation of earnings due to mistakes in the assessment of work in progress and completed but unbilled work – recognition of debts, calculation of completed work (UITF40/FRS102) etc is crucial;
  • Do not omit ancillary income: Returns (VAT or Income Tax Self-Assessment) must be complete including income arising from assets/property, authorship/royalties, lecturing, direct access etc;
  • Disallowed Expenditure: Some purchases may have a dual purpose (clothes) and also consider whether travel-related expenses are wholly exclusive;
  • VAT Return: Quarterly VAT Returns are required together with annual Income Tax Self-Assessment Returns (including year-end accounts); If chambers invoice inclusive of VAT, the VAT funds deposited need to be included in the barrister’s quarterly Returns.


In the Case Study above had there been a voluntary tax disclosure before HMRC’s letter, it is highly likely that Tax Networks would have negotiated settlement without admission of tax fraud!


By Chris Leslie, Specialist Tax Investigations and Disputes Adviser at Tax Networks.

Chris Leslie is an experienced Tax Investigations and Disputes Adviser from Tax Networks Limited, instructed by accountants and lawyers nationwide in complex, document heavy HMRC interventions.



Tel: 07852 700634


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