How to Survive a Tax Investigation – Helpful Clients (part 1)

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Particularly for practitioners, we thought it would be helpful to run a series of articles aimed at giving you practical advice to pass on to clients in the form of questions and answers to guide as to what to do if clients receive the dreaded letter from HMRC advising you they or their business is under investigation (or “enquiry” as it is called by HMRC). This may also be of general interest for both business owners and individuals. So here we go…

Q. Can I ignore the letter?
A. No – they won’t go away! But don’t panic – most investigations can be resolved satisfactorily with a bit of organisation and professional help if necessary.

Q. So what should I do with the letter?
A. Read it carefully – ensure it is addressed to the correct person or business, and if it is make a note of the deadline for a reply. If you do not reply in time, HMRC can issue financial penalties. If you feel the deadline is unreasonable then ask the enquiry officer for an extension – they are generally happy to allow this. But do this as soon as possible – don’t wait for deadline day as this just annoys them!

Q. Do I need an accountant?
A. If you have an adviser such as an accountant, ensure they have received a copy of the letter, and decide whether you need their help to deal with the investigation (we would always advocate seeking suitably qualified professional advice).

Q. The letter is asking for a lot of information – do I need to supply it all?
A. HMRC are only entitled to ask for documents and information that are “reasonably required” to enable them to conduct their investigation. If you believe they are exceeding their powers, then raise your concerns with your adviser or the enquiry officer. Also, HMRC can only ask for documents or information that are in your “power or possession”, so if it is beyond your power to obtain a particular document or piece of information then again refer your concerns to your adviser or the enquiry officer.

Q. The Enquiry Officer is asking to meet me – do I have to attend?
A. Unless HMRC are conducting a criminal investigation, they cannot force you to attend a meeting, but a refusal to attend can result in HMRC alleging non-cooperation with their investigation, which can lead to financial penalties. This is an issue to discuss with your adviser before deciding whether to attend. If you do attend we would recommend that your adviser attends with you.

Q. Can HMRC inspect my business premises?
A. Yes – with certain restrictions. Unless it is a Criminal Investigation HMRC can only inspect financial records – they cannot search. If part of your home is being used for business purposes, HMRC can inspect that too, but they cannot inspect non-business premises.

A Final Thought from us
The above guidance is intended to answer some common questions in the event of an HMRC investigation, but we would always recommend seeking suitable professional advice. We at Outhwaite Associates Ltd offer a free, no obligation, initial consultation on any tax matter, so please do feel free to contact us if you have any questions, by email on stephen@outhwaite-associates.co.uk or ilyas@outhwaite-associates.co.uk or by telephone on 07949 929663. Our website is at www.outhwaite-associates.co.uk We commonly work in conjunction with businesses or individual’s regular accountants, who value our specialised services.

Next month, we will look in more detail at exactly what documents and information HMRC can request, and how far back in time they can ask for records for. In the meantime, please do contact either Ilyas or myself if you have any questions.