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Where Taxpayers and Advisers Meet

Extending an Investigation

CuriousGeorge
Posts: 4
Joined: Fri Feb 12, 2016 1:18 pm

Extending an Investigation

Postby CuriousGeorge » Fri Feb 12, 2016 1:47 pm

I work as as an accountant for a SME, £5m turnover.

The HMRC wrote to us back in July 2015 regards checking corporation tax for years ended 2014, 2015.

There were various questions in the letter, quite straight forward to answer satisfactorily , they also requested a copy of the company records for the 2 years, which we forwarded in the form of a copy of our SAGE line 50 book keeping records.

We didn't hear anything for a few months, then were informed they wanted to visit our premises for a VAT inspection, and to check records going back for 4 years.

My question is how are they allowed to extend the investigation like this? as far as i'm concerned our records are accurate and correct, they have no basis to extend the enquiry.
VAT returns submitted tie to the records kept on sage and to accounts prepared for corporation tax purposed etc.
We also didn't hear anything further regards assessments raised on the corporation tax check.

I assume they are allowed to do this but we haven't really been given an explanation to why?
also can they decide to request 4 years worth of information from the original 2?

Would it be worth me asking the HMRC for an explanation? or would HMRC misconstrue this as a sign of guilt and dig even further (wasting our time).

The reason i ask is we have a fairly large corporation tax refund pending for 2014, 2015 that the HMRC will not process until the investigation has closed.
And tbh it does feel like a bit of a fishing exercise.

wamstax
Posts: 1868
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Extending an Investigation

Postby wamstax » Sat Feb 13, 2016 11:34 am

Hi there HMRC can make any assessments they like for up to 4 years back if they can prove that they have discovered that profits have not been assessed or tax liabilities have been understated. But let us be quite clear they cannot extend an investigation back into years earlier than those to which they have issued enquiry notices. Additionally I would not provide HMRC with earlier years records if and until they can prove (on the balance of probabilities at least) that profits have been understated or VAT returns have been incorrect.

HMRC have a habit of asking for whatever they think they need to go on "fishing expeditions" and they should not be allowed to get away with it. Just giving them whatever they want without question could amount to professional negligence. These matters are quite complex and you should ensure that you have the services of someone who is experienced in that area. Feel free to give me a call on 07751720507 to have a short free chat if you thought it was needed as there are ways that HMRC can get earlier years records but it has to be under reasonable discovery or reasonable request basis. You might also get some tips by looking at www.wamstaxltd.com and the link to the web page on that site titled "don't let them bully you"
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

wamstax
Posts: 1868
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Extending an Investigation

Postby wamstax » Sat Feb 13, 2016 11:38 am

As regards the earlier posting they can of course extend their enquirers into years earlier than those for which notices have been issued if they can prove that the enquiry years profits or tax liabilities have been understated negligently/carelessly or deliberately or as a result of fraud. Seems part of my posting lost in earlier one for some reason (will get up to speed with new IPad sometime)
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

robbob
Posts: 2800
Joined: Wed Aug 06, 2008 4:01 pm

Re: Extending an Investigation

Postby robbob » Sat Feb 13, 2016 2:20 pm

Wamstax
But let us be quite clear they cannot extend an investigation back into years earlier than those to which they have issued enquiry notices. Additionally I would not provide HMRC with earlier years records if and until they can prove (on the balance of probabilities at least) that profits have been understated or VAT returns have been incorrect.
Specifically with reference to vat matters only as the OP seems to be specifically asking about the vat issue.
Can you advise under what written guidance the OP would not need to provide vat records to a vat officer for the last 4 years and under what basis they would not be able to raise a vat assessment if they found something wrong dated anytime in the last 4 years? Cheers.

wamstax
Posts: 1868
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Extending an Investigation

Postby wamstax » Sat Feb 13, 2016 5:07 pm

Robbob

The reason for wanting to chat is that it is possible that we don't have the whole story - through no fault of the OP but perhaps not appreciating everything.

To answer your question as regards the VAT - it would be normal for a fresh VAT visit - an announced assurance visit - to request have up to 4 years of records made available but to look at the latest first and depending on the timescale and volume of records work backwards. If the assurance visit raised risks that could be corrected by the assurance officers then that would be done. However if there were risks that could not be corrected or improved they would have been flagged up for an interventions officer to pay a visit to see the bad boys.

Here we have both Direct tax coming in who have very definitive time limits and reasonableness to take note of and then VAT/Indirect officers also later indicating that they want to visit.

My initial response would have been "can't you two parts of HMRC get your act together " as we are already the subject of an enquiry by HMRC -Direct Tax - which is ongoing and you can therefore get the answers to your questions by examining the records that your department already holds. We assume therefore that you will now cancel your intended assurance visit and look forward to your confirmation that it has been cancelled. If of course you are now assisting the Direct tax team with their investigation then we want to know why this has happened and what evidence does Direct tax think that they have to show that it is reasonable for you to be extending their enquiry into earlier years before we decide whether to accommodate your request for a visit or not. If however you are on a "fishing expedition" then this will not be accommodated and we will look forward to your decision that on reflection the matter has been passed back to HMRC Direct to paddle their own canoe.

You see I think that there are so many possible alternative reasons for the turn of events that really all the facts and dates need to be elucidated to decide what is really the true and factual situation - on both sides.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

CuriousGeorge
Posts: 4
Joined: Fri Feb 12, 2016 1:18 pm

Re: Extending an Investigation

Postby CuriousGeorge » Wed Mar 02, 2016 3:26 pm

Hi Wamstax

Thanks or your reply, it has certainly given me food for thought.

I'll probably come back to if i may after i've had time to digest your advice

Thanks

wamstax
Posts: 1868
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Extending an Investigation

Postby wamstax » Sat May 21, 2016 11:41 am

Hi Curious George
Guess you managed to get a result with the pointers and no need for follow up but would really appreciate an update or resolution just for information. You could send it direct to me at bill@wamstaxltd.com if you wanted.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website


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