Tax Investigation 2006-7 schedule 36

[skyhilee]

I am in the process of dealing with a personal tax enquiry/investigation for 2006-7.

Questions I have are:-

1. The HMRC are using a schedule 36 notice to obtain bank statements. Can they use the schedule 36 notice (which I understand was introduced in 2009) to request the bank statement info for 2006-7 tax year?

2. Is there any point in resisting this request via reviews or tribunals etc? (as everything seems to be loaded in their favour)

Regards

[AvocadoK]

1. Yes, subject to para 21 Sch 36 which requires that an officer of Revenue and Customs has reason to suspect that–

(a)an amount that ought to have been assessed to relevant tax for the chargeable period may not have been assessed,

(b)an assessment to relevant tax for the chargeable period may be or have become insufficient, or

(c)relief from relevant tax given for the chargeable period may be or have become excessive.

The new powers mean that they do not need to make a discovery assessment to prise the information out of you. Now they can use their information powers to get the info, and then raise the discovery assessment.

2. Unlikely to be much point in resisting; probably a better strategy is to make a full disclosure of everything that HMRC are bound to find out, with a view to mitigating penalties.

Regards
AK

[wamstax]

You say that you are in the process of dealing with a personal tax enquiry however you do not say when this started, what areas of your personal tax are HMRC or have they been investigating (oops sorry enquiring into as they would say it) and what if anything have they already discovered in that they seem to have gone to a Sch 36 notice and my experience would suggest that there would previously have been a requestfor such items to be provided voluntarily.

Are you aware that there are any matters that they should have had disclosed to them either in your return or after they opened their enquiry?

Normally they would have had to open an enquiry into your 2006-07 tax return by 31-01-2009 (unless it was filed after 31-01-2008). When did they open the enquiry and is it likely that they HAVE DISCOVERED that some income that should have been taxed was not etc .... as AvocadoK properly related .... only after the normal enquiry window of 31-01-2009 had passed. If they discovered anythign prior to that date and failed to make use of it during the enquiry window then in my view there would be NO DISCOVERY and they could not pursue matters as they gave up their right to enquire into it when they allowed the time window to expire.

Can you elaborate a bit so that we can address issues more fully.

However to answer your question Yes they can use Sch36 for pre April 2008 matters HOWEVER its use has to be reasonable and proportionate to the enquiry.

Have they said why they want the bank accounts and what concerns they have that require the production of your bank accounts? Are you hiding anything? Be circumspect in answering the last question as this is a public forum , i.e. no specifics to be given but simple yes or no and rough area of tax e.g. income tax , vat, capital gains tax etc etc

[skyhilee]

Thank you for your quick responses. Further info as follows:-

1. The enquiry into tax year 2006/7 was started on the 16th January 2009, so within their alloted time.

2. The enquiry letter states " My enquiry is into your capital gains tax position". But they also say " I will not be checking into other area's of your return unless your reply, or any other information, gives me reason to do so". (In my opinion this is just a catchall to justify a fishing expedition?)

3. There was a request for bank statements which was followed by the schedule 36 and the threat of penalties for not complying.

4. There were certainly no capital gains made in the tax year 2006/7 and as far as I am aware no other tax issues that year.

The HMRC have been informed that no capital gains were made that year but say they require bank and savings statements "to check"!

Regards

[wamstax]

OK so let's look at practicalities. Did you dispose of any properties or assets in either the years to 5th April 2006 and/or 2007 and/or 2008 - remembering that the date of disposal on a non-conditional contract of an asset is on exchange and not actually when the monies are received or the new acquisition is registered with Land registry etc. HMRC have loads of information in relation to property disposals and/or housing benefits and have been running projects along those lines.

So if you haven't disposed of any properties- are there any members of your household or like named individuals who may possibly have disposed of something and there has been confusion. If the answer is again no - then what does an examination of ALL your banking accounts reveal? Can you account for ALL deposits to your banking accounts? If so while accepting that HMRC could be on a fishing expedition - but might be acting REASONABLY on misinformation (or correct information) is providing the bank statements going to bring the investigation which has now been going for 18 months to a close. If so then (assuming that you have had your banking accounts checked out by somebody that knows what they are doing) providing the banking accounts under the formal request is the recommended way forward.

Equally given that you have presumably said that there were no disposals of assets in the year to 5th April 2007 and if this is correct you could take the riskier strategy of forcing the issue by saying that you have already advised them that you have not been liable to tax on any capital gains in the whole year to 5th April 2007 and you are appealing their request as it is not reasonable and not proportionate to the risks that they have advised - the capital gains tax aspect of your personal tax return. However can I just say that this is a risky strategy if there is the possibility of any chargeable disposals having taken place by you and there si in fact somethign in those bank accounts that you would not want hMRC to be seeing. Of course I would also recommend before going down that line that you do get somebody who knows what they are doing to review your banking and financial accounts for any tell tale signs of "undisclosed assets disposals or undisclosed banking accounts or other tax sensitive assets.


You

[wamstax]

You should also think about how you are going to approach matters if you do find that from these postings you consider that perhaps there has been confusion - either in your previous stance and information. Clearly however to have got to this stage of an aspect enquiry with formal action being taken after 18 months for basic information suggests that you - or your adviser if you have one - have missed an opportunity or two to get matters resolved a lot earlier. Time unfortunately hardens attitudes and causes stress unless you have a strange sens of adventure with the "startrek" syndrome - going somehwere you haven't gone before

[skyhilee]

Thanks for your advice.

I will get the statements checked out by an accountant if possible prior to supplying them to HMRC , although this is academic as any "adverse" information contained in the statements will still have to be supplied to the HMRC?
There appears to be no other option (other than the "riskier" strategy of appealing?) which I would be quite happy to do but I feel would entail an even longer timescale and make no difference to the outcome ie I will still have to produce the statements.

I would agree that I possibly missed an opportunity or two to resolve matters earlier, the obvious one being just to give up the statements and any other information that the HMRC requested?

The advice I have gleaned from these forums is not to be bullied into supplying information to the HMRC who will obviously seek to make use this information.

I did hear that you can make an appeal to commissioners/tribunal in order to get an enquiry closed or finalised if it has taken a long time? Any advice on this aspect?

Regards














supply the gleh/.at the initial request

. , butnsendaba

[wamstax]

Taking to appeal to get it closed down will not work where the HMRC still have a REASONABLE request out for information.

[skyhilee]

And it does appear ALL requests for information are reasonable in the eyes of the HMRC.

Thank you for your advice and I will get on and deal with the statement issues.

Regards