Everything you wanted to know about a tax investigation - Should I go to a meeting?

In the first of three articles, freelance journalist Nick Morgan looks at the tricky area of meetings with HMRC in enquiry cases.

No - well that’s the short answer. Now let’s start with the basics: this is not a meeting, it’s an interview.

Ex-Revenue investigator Simon Sweetman says,

 “I have worked with Inspectors who thought it a victory if the taxpayer cried [in the interview].” (from "I Don't Like Meetings", by Simon Sweetman on AccountingWeb).

Phil Berwick, Director of Tax Investigations at Tenon says that in a recent case an unrepresented taxpayer went to a meeting that ended up lasting five hours,

“The individual was so upset and aggrieved at being subjected to this ordeal that they thought it would be easier to agree with the inspector [rather] than resist further” (from "Ten Mistakes Made During Tax Enquiries (and how to avoid them!)").

HMRC employ a carrot and stick approach to interviews: the carrot is that the investigation may be solved quickly if the investigator has the chance meet the taxpayer and talk with them directly. The stick is that refusing to attend can be interpreted as non-cooperation and a penalty may be applicable.

Both the carrot and the stick are fake.

A meeting - certainly in the early part of an investigation - will not speed up an enquiry. As you would logically expect, investigators use meetings to gather information in order to open up avenues of investigation and to test known facts: to see if you are lying to them.

Here is what the HMRC Enquiry Manual tells Inspectors about how important the interview is to an investigation, in one word: “vital” ( Working an Enquiry: Meetings: General ).

Interviews are entirely for the benefit of HMRC.

So now we know that the carrot is fake what about the stick? Well there is no debate about one thing, which is that there is no legal obligation to attend an interview.

Stephen Camm, former Inland Revenue investigator and now Head of Tax Investigations at PriceWaterhouseCoopers says,

 “Importantly taxpayers should know that an interview is voluntary - most don’t realise this and feel compelled to attend.”

As for a penalty, well the Code of Practice 11 states,

“In calculating the amount of the penalty, we will take into account the extent to which you have been helpful…”

But if you answer written questions in full and on time, then it would be reasonable to argue that full co-operation has taken place and no penalty for non-attendance should be levied.

Accountant Ken Frost of the hmrconline blog says,

“Under no circumstances should anyone attend an interview with HMRC personnel without appropriate representation. HMRC staff are incentivised to maximise the tax take therefore it’s in their interests to skew records of meetings in their favour.”

The above is an extract from 'Notes From Hell - Tax Investigation for Dummies' by Nick Morgan, a freelance journalist who was the subject of an HMRC enquiry into his self-assessment return.

Article Added Saturday, 20 June 2009

Your attention is drawn to the disclaimer on this site, which applies to the content in this section.