Nobody likes to receive post from the tax man, after all it’s usually a bill isn’t it?
What happens when it’s worse than a bill – HM Revenue & Customs have chosen your Tax Return for enquiry? It’s easy to panic and you’ll have lots of questions rattling around your head. Why have they chosen me? Did I make a mistake with my figures? Do they think they have information on me? How will I represent myself in the best way?
In our experience enquiries from the tax man are rarely as bad as they at first appear. The letters are very formal and usually quote tax legislation – that’s just a legal requirement they need to add in order to make sure their enquiry is lawful. The key issue from the taxpayer’s point of view is ensuring that the letter is indeed lawful (Some enquiries can be shut down immediately because the request is already out of date), that the information being requested is justified and necessary and that they are clear of the time frame given to comply with the requests. Being on time with providing the information requested will help minimise penalties if it turns out you have undeclared tax liabilities.
We are often asked how long an enquiry is likely to last.
The short answer is that it entirely depends on the type of queries raised and where the responses lead. Some enquiries can be sorted out very quickly. For example HMRC think you have been receiving child benefit which you need to pay back because you’re a higher rate taxpayer. In reality they have your former address and it’s actually your tenant who’s claimed child benefit. A quick phone call to HMRC will sort out the mistake and the enquiry will be promptly closed.
Conversely, for example where HMRC enquire into your VAT Returns or business accounts, your initial responses may lead to supplementary questions which mean that the enquiry lasts for months, maybe even years.
When we deal with enquiries our first step is to carefully review the initial letter and attempt to establish the reason that particular return has been chosen. We will always seek to speak to the officer dealing with the case to see what information they are prepared to divulge, so that we can ensure our response will be appropriate. Although enquiries can be opened randomly, in the vast majority of cases HMRC will either have information that does not tally with the tax return submitted, or their internal risk assessment has indicated there are likely discrepancies in the figures submitted.
Our advice is not to contact HMRC directly yourself. The officers at HMRC are highly trained in questioning and will lead you down a specific track which could be detrimental to you. HMRC’s focus is on increasing revenues, not helping you to close the enquiry quickly. The best thing to do is speak to your accountant who will provide HMRC with clear and concise responses to their queries in a timely manner provided they are satisfied that HMRC’s requests are justified. If you must contact HMRC yourself then be polite and courteous to the person dealing with your case – after all they will be the one ultimately making decisions on how your enquiry proceeds.
If you have an open enquiry and are either not represented or are dissatisfied with your current accountant and would like an experienced team of tax advisors to help you deal with HM Revenue & Customs then contact Jan Friend by email or on 01634 731390.
Thee content of this blog is correct as at 10th October 2019