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Where Taxpayers and Advisers Meet

Change by HMRC to Reason for Enquiry

Cornwall
Posts: 16
Joined: Wed Aug 06, 2008 3:34 pm

Change by HMRC to Reason for Enquiry

Postby Cornwall » Mon Feb 24, 2014 12:55 pm

An enquiry was raised into a tax return 18 months after it was submitted.

Facts: tax return completed in december 2011 in March 2012 the contents of the return was discussed with HMRC before a refund of tax was made. All the information was included on the Tax Return, wages, terminations payment and compensation sum of £30,000 (which would appear to be the sticking point)

In August 2013 an enquiry was raised.

It was pointed out to the inspector, in first letter that this was outwith the time limit and could he supply me with the information which arose after the enquiry window was closed.

The reply was that HMRC were entitled to look into the matter under section 29 of TMA.

Second letter sent stating that there were only two reasons to open an enquiry so would he provide the information requested above or close the enquiry (as there was no fraud or negligence involved). The other alternative was to deal with the appeal against an assessment he raised (which was incorrect as no personal allowances were included)

Another letter (two months later) has been received stating that yes there are 2 reasons one of which is 'because of fraudulent or negligent conduct and now careless behaviour.' Which is what he is now accusing the tax payer of????

I feel this is grasping at straws and wonder if he can alter the reasons for raising an enquiry after this length of time?? and would this new 'careless behaviour' apply to an enquiry case already opened i.e. retrospectively. (He has now issued a information request under Para1 of Sch 36 to Finance Act 2008)

Help??

Scot

wamstax
Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Change by HMRC to Reason for Enquiry

Postby wamstax » Mon Feb 24, 2014 1:20 pm

Firstly I would never entertain HMRC in relation to an enquiry any enquiry notice that is issued outside the time limit. However I suppose it is too late in that you have complied.

S29 does not provide an avenue for enquiring into a tax return AFTER the enquiry window has closed UNLESS the information was not available to the hypothetical officer looking at the tax return and was enough to make it "clear" that an enquiry was necessary. It only allows the officer to make an assessment if he/she has discovered after the enquiry window closed (i.e. it was not clear before the enquiry window closed that an enquiry was needed). Just watch they are not trying to cover their tracks for failing to open the enquiry in good time.

It is accepted that HMRC can enquire into any matter BUT if the taxpayer refuses to cooperate he/she must then have recourse to either
(a) making an assessment (to be made to best of judgement and on information that he/she considers gives knowledge that tax has been underpaid)
or
(b) issuing a Sch 36 notice to get what information is reasonably required to enable them to establish that tax has in fact been underpaid.

Of course there is no substitute for looking at the full paperwork but you would need to consider whether the issue of the Sch 36 notice was reasonable and valid (probably most are valid if officer has discovered that there is a strong view that tax has been underpaid).

If of course he/she has raised an assessment then I would ask why there is any difficulty in him getting the appeal settled with you based on the facts. Perhaps of course he/she had already been to the payer of the compensation so that they just need to firm up facts to determine tax unpaid BUT of course this could mean that they had the information before the enquiry window closed. You mentioned some discussion before a refund was made and the question would be whether this was an enquiry into a claim etc that might give them a problem. You might need to review what was said at that time as well.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

Cornwall
Posts: 16
Joined: Wed Aug 06, 2008 3:34 pm

Re: Change by HMRC to Reason for Enquiry

Postby Cornwall » Tue Feb 25, 2014 1:03 pm

Dear Wamstax
Many thanks for your reply.
I have NOT complied with any information requested by the Inspector I have only ever told him that he is outwith the enquiry window. As the matter revolves around PAYE I cannot see how any information would not have been available prior to the enquiry window being closed. His gripe would appear to be that I have treated the compensation sum as tax free, clearly entered onto the Tax Return.
He raised an Assessment when he first opened the enquiry, which I appealed against (just in case)in my second letter asking him to either provide the information which he believes became available after the time limit, or close the enquiry.
The discussion with the Tax Office regarding the repayment went into each detail (box) entered onto the Tax Return and why this was done. When I reminded the Tax Officer about this he stated that he felt it was not an 'enquiry' into the return as it was not carried out by a high enough Tax Officer, I stated that I would have not known the Officers qualifications and it is irrelevant.
My last reply to him was 17th December (faxed) and I did not receive any further communication until 20th February when he decided that he had a right to open the enquiry under 'careless behaviour'. ??? This is my sticking block, I still feel that he is not entitled to open an enquiry at this stage??? Am I right. This revised reason being even later than the original.
Many thanks
Scot

wamstax
Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Change by HMRC to Reason for Enquiry

Postby wamstax » Tue Feb 25, 2014 3:08 pm

Yes but assuming that you are correct that he has made an assessment already and you have appealed it you will have to provide the necessary evidence to determine the appeal
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

bd6759
Posts: 3107
Joined: Sat Feb 01, 2014 3:26 pm

Re: Change by HMRC to Reason for Enquiry

Postby bd6759 » Wed Feb 26, 2014 8:16 pm

The simple questions you need to consider are:
1. Is the tax return wrong? The answer to that is probably yes.
2. Is there tax unpaid because the tax return is wrong? Again, the answer is probably yes.
3. Were you careless when you completed the tax return? If you put figures in the wrong box, you probably were careless (unless you deliberately put them in the wrong box). If you were careless, HMRC have the right to assess. It does not matter what you think they might have known during the enquiry window.
4. If you were not careless, did the tax return contain sufficient information to draw HMRCs attention to the the fact that there was an insufficiency in the return? In order to avoid a discovery, the information in the return has to draw attention to the fact that it could be wrong. "Made available" does not mean that the information might be held somewhere in HMRCs archives. It means it must be made available by you in the return.

q3 and q4 are either/or. Only one needs to be satisfied.


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