HM Revenue & Customs (HMRC) have been considering various ideas which might reduce the time spent on enquiries and have recently announced that trials are now going ahead. These trials will involve them contacting businesses and individuals directly and inviting them to take part, voluntarily, in these trials.
There are a number of different trials but they all involve HMRC contacting you directly, by letter and/or by telephone. If you do receive a letter, or a telephone call, it is likely that they are focusing on you because their computer has identified that some of your figures appear unusual or that you operate a ‘risk’ business e.g. one that deals in cash. To give you more of an idea of the sorts of contact that you may receive, we have summarised some of HMRCs’ proposed methods.
· A ‘real time audit’ of business records i.e. a check of current records to ensure that they meet HMRC standards. If such a check is undertaken, it will mean that HMRC will not open an enquiry after the end of the year.
· A short risk review, which involves issuing a questionnaire to a business, based on a risk profile developed for the particular trade.
· Self audit. Letters or telephone calls will require the taxpayer to consider specific entries on their return and make necessary adjustments, with a requirement to notify HMRC of any adjustments made.
· Telephoning taxpayers to explain why HMRC consider that an error has been made on a return.
· Correction challenge. Where HMRC hold ‘good quality information from a reliable source’ (e.g. details of bank interest received), they will correct the return, tell the taxpayer of this and ask for an explanation as to why the original figure was incorrect.
· Current health check. HMRC will approach a target group within which they believe there are risks of non compliance. They will tell the taxpayers what the risks are and suggest that they consider them when completing their returns.
Currently, HMRC have no power to carry out the majority of these trials without raising an enquiry, so these ‘interventions’ potentially substantially extend the powers of HMRC. It is understood that accountants, acting as agents will be sent copies of any letters sent to taxpayers, including letters giving advance notice of telephone contact.
Please note that co-operation is entirely voluntary but HMRC are becoming increasingly aggressive and attempting to deal with them without our help could potentially lead to some very difficult and costly situations developing.
We would recommend that you do not answer such letters without speaking to your accountant or tax agent first. In particular, be extremely careful what you say to any HMRC official over the telephone. We strongly suggest that you make a note of the caller’s name, address and of any requests made and/or questions asked. We also suggest that you ask the official to contact your agent.
If you receive any such contact from HMRC and are concerned about its possible repercussions please feel free to contact us.
Simon Towers
Clifford Towers – Chartered Accountants
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