3 years on in tax investigation

[keving]

18th of december will be my third year anniversary of the tax investigation nearing the end , up untill last week i had ,had 2 tax inspectors then out of the blue i was told by my tax adviser that the inspector on my case had retired !,just like that . at present the sellement they are looking for is some £5000 for the time period of some 5 years plus penalty & intrest.
my question is .is there any leverage from my behalf to have the penalty & intrest factor reduced or better still no intrest /penalty to pay at the moment they want a figure circa £4500 .
due to the time this investigation has taken its been a very worrying time & i have complied and submitted everything as requested ,have been open with disclosures and responded in good time to all requests .

is 3 years a norm for a investigation of this size ? i am self employed with 1 employee and have struggled over the last 12 months to keep afloat

is it normal to have a frequent change of tax inspector as i have had ?

just how flexable are hrmc on penaltys/intrest ? what would be a minimum sum they would accept could i ask for them to be scrapped would they consider this or would it be a definate no ?

at the end of the day it may not sound much to pay £9500 but i would struggle so any help with suggestions would be greatfull .

[scottie2]

Hi Keving-I think we would need a bit more information on why the enquiry has taken this length of time to reach this stage. The average duration for most enquiries is approx 18 months, but of course there can be exceptions to this general rule of thumb. Have there been delays caused by HMRC changing personnel or dealing with correspondence?-if this has been the case your tax advisor should bring this to the attention of HMRC. From your posting it does sound as if HMRC have been tardy in taking the enquiry forward and your tax advisor should also be making an issue of these potentially frequent and costly delays-ie costing you money in additional interest payable to HMRC!

Is there any dispute with HMRc's findings and the basis of them calculating the £4500-£5,000 due and have they explained why they are seeking to re-open the earlier years and seek tax/int/pens for these years too? HMRC would normally apply the principle of continuity-ie-if the issues existed in one year, they would have arisen in earlier years too-do the issues HMRC are seeking tax on occur in earlier periods or are they specific to the year reviewed in detail/ HMRC would normally seek tax for six years, hence their approach in your enquiry. Depending on what is involved, HMRC may accept that going back six years is excessive and it will be down to your advisor to argue your case.

The interest position is statutory-ie it cannot be waived in it's entirety, however if HMRC accept that the delays were caused by their inactivety, they may be prepared to waive a proportion. The penalty will be determined with reference to three factors-disclosure/co-operation and seriousness-and will start off at theoretically 100% of the additional tax being sought. It will be reduced ordinarily to somewhere in the rangeof 10-30% and the inspector will advise you what he is looking for and how it has been calculated-depending on your financial circumstances, the inspector will consider a time to pay arrangement over a number of years, but this will of course cost you more as further interest will be payable.Please get in touch if you need more help. Hope this is of use. manoj.anand@wlhtax.co.uk