Enter Your E-mail

John Andrews of the Low Incomes Tax Reform Group ( www.litrg.org.uk ) provides some helpful guidance on what to do if your tax return is selected for enquiry by HM Revenue & Customs.

Introduction

What if one day you receive a brown envelope in the post and inside is a letter from HM Revenue & Customs telling you that they are making some enquiries into your tax return or tax credit claim?

How will you feel? Worried, confused, irritated or perhaps, even angry? But what should you do?

What do the Revenue mean by their letter? Do they think that you have actually done something wrong? If they don’t, why are they asking questions?

If this is happening to you and you want to know how to react, then we have updated and expanded our advice section entitled How to survive an enquiry by the Revenue (http://www.litrg.org.uk/help/lowincome/selfemployed/assessment.cfm#enquiry).

If you are someone who has deliberately set out to defraud the Revenue then these pages are not for you: you will need a good lawyer. But for others we hope that it takes some of the mystery and worry out of the enquiry process.

The following is an extract from the above guidance, covering the early stages of an enquiry.

The opening letter

• In the opening letter, the Revenue should only be seeking documents and information on which they can judge the accuracy of your return or claim - nothing more.
• When you get the letter check in their leaflet whether the Revenue is within the time limit for making an enquiry in the first place.
• Is what they are asking for reasonable? If you think it isn't, ask why it has been requested.
• Are you able to supply the documents and information within the time limits given? Again, if you think that you have not been given enough time, contact the Revenue to ask for a longer period telling them why it is needed.
• At each stage of the enquiry you will be asked informally for any information which the Revenue are seeking - under normal circumstances they are obliged to do this before using any formal powers.
• If you are asked questions or asked to give explanations (or the Revenue have expressed a specific concern), at this stage, you should give them full detail. There may be a simple answer which could enable the enquiry to be closed.
• They would have to reject these explanations, with reasons, before they can justify asking about something they had not asked about previously.
• If you feel uncomfortable with replying in a straightforward way, then seek professional help.
• Remember that you have the right to apply for the enquiry to be closed at any time.

Supplying documentation and information

• If you do not supply the information and/or documentation within the time limit, the Revenue may issue a formal notice for their production. This formal notice will provide a fresh time limit and also warn that you may be charged a penalty if you do not supply what has been requested and within the time allowed.
• However, what the Revenue asks for must be relevant for checking that return and you must actually have or be able to obtain any documents requested (they must be in your power or possession).
• If you feel that the above is not the case or consider that you have not been given sufficient time to supply the information and/or documentation, you should contact the enquiry officer as soon as possible.
• If you are unable to reach agreement with the enquiry officer in a tax enquiry, you can appeal against the notice to the Appeal Commissioners. If you want more information about contacting the Commissioners you can ask the Revenue for the leaflet Tax Appeals – A guide to appealing against decisions of Her Majesty's Revenue and Customs on income tax and other direct tax matters or download a copy using the following link: http://www.generalcommissioners.gov.uk/FormsGuidance/formsGuidance.htm
• If you have business premises, you can suggest that any records are reviewed there, or sometimes the enquiry officer may suggest this. However, if you prefer, you can ask that records are examined at the Revenue office or at the premises of a professional adviser, if you have one.

If the Revenue ask for a meeting

• In the past meetings with HMRC were not a matter of routine. But under new working methods coming into play from 2008 they may become more common. You do not have to attend a meeting. It is up to you whether you agree to meet or not.
• There are a number of things to consider. Aside from the matter of co-operation, which has already been mentioned, a meeting may shorten the length of the enquiry, be more cost-effective and limit continuing correspondence.
• It may well be that you want a meeting yourself, for these very reasons, and, if so, you should ask for one.
• You can take a friend or adviser along with you, for support, if you want and you can ask for any meeting to be held on your home ground.
• The Revenue enquiry officer cannot insist that it be held at any particular venue and the Revenue have no right of access to any premises under their ordinary statutory powers. [ But see also Mark McLaughlin's April article on proposed new HMRC powers which may have effect from 2009 - inlcuding the right to inspect business premises: http://articles.taxationweb.co.uk/index.php?id=587 ]
• If you are seeking a meeting it does not have to be pre-arranged but it is to your advantage to try to agree a date, time and place.

What to think about regarding any possible meeting?

• Your time and costs of attendance.
• The stress you might be caused.
• As above, a meeting might actually reduce your costs of the enquiry.
• You can ask to receive an agenda prior to holding the meeting - this should prevent too many surprises.
• The enquiry officer may see a refusal to meet as a sign that you are not co-operating with the enquiry. If you decide against having a meeting make sure that you make it clear to the Revenue that this is not the reason for your reluctance to meet if, indeed, a meeting really is necessary.
• A meeting in progress can be ended at any point; for example, if the enquiry officer acts unreasonably or aggressively or for any other reason.
• You can ask for a break during the meeting if you want one. Should you have special personal needs, to assist your attendance, let the Revenue know beforehand.
• You do not have to agree to discuss your tax affairs with the Revenue in front of your spouse or co-habitee, or your business partner(s). You each have a right to privacy.
• If you refuse a meeting and reach no agreement in the enquiry with the Revenue, the Revenue may, anyway, have the opportunity to ask its questions in a hearing before a tribunal.