Case Study: Self-Employed Builder Overcomes HMRC Tax Challenge
A self-employed builder came to us after experiencing difficulties with HMRC. Although he had always prepared and submitted his own VAT and Self-Assessment Tax returns, his 2015 return was flagged for review. In January 2017, HMRC questioned his claims for depreciation and bad debt relief, which created serious tax concerns.
Why the HMRC Dispute Happened
The depreciation claim turned out to be a simple mistake. However, the significant bad debt was genuine. It arose when the builder’s main contractor became insolvent after not receiving payment themselves. As a result, the client suffered major financial losses.
To cover his shortfall, he made an early pension drawdown in 2015/16, withdrawing £77,817. From this, income tax of £30,259.90 was deducted. Unfortunately, the client was unaware of the restrictions on tax relief. From April 2013, the maximum claimable income tax relief was limited to the greater of £50,000 or 25% of adjusted total income. The remainder could only be carried forward.
Although he correctly entered the pension drawdown on his return, he failed to claim loss relief against the income tax paid.
How Our Tax Experts Helped the Self-Employed Builder
When we reviewed his case, we discovered an additional issue. His last pension drawdown of £25,887 was taken on 15 March 2016. Had he delayed this by just 22 days — after 6 April — he could have claimed an additional £50,000 in tax relief.
Nevertheless, our intervention still achieved excellent results. We reclaimed £26,816.60 for him. With earlier professional advice, he would have saved a further £3,443.30.
Lesson for Self-Employed Builders
This case highlights the risks of handling complex tax matters alone. Transition rules and relief limits can easily be overlooked, leading to costly mistakes. Seeking professional advice early can prevent unnecessary tax bills and maximise savings.
👉 If you are a self-employed builder or tradesperson facing HMRC scrutiny, speak to us today. The right advice could save you thousands.