HMRC TAX ENQUIRIES
Previously Known As Inland Revenue Tax Investigations Get Professional Help!
Most Accountants would strongly recommend that any individual or business that is selected for an enquiry by HMRC immediately seeks professional representation. The local Tax Office or Special Compliance Office (SCO) will deal directly with your Accountants whilst they are acting as your adviser, freeing time for you to attend to your regular business affairs and alleviating some of the worry at this difficult time. Random Enquiries
To discourage tax evasion and ensure the whole system is operating fairly, HMRC will select some tax returns for enquiry at random. Therefore, if HMRC make enquiries into your Self Assessment tax return it does not mean that they think it is incorrect. When HMRC enquire, they will not tell you whether your tax return was selected at random or as a result of other checks. HMRC say this is because it does not make any difference to how they carry out the enquiry. Inland Revenue's (HMRC) stated aims for tax enquiries are:-
To ensure you to pay the right amount of tax: no more, no less. They want you to feel confident that other taxpayers are paying what they should in a fair tax system.
In order to do this, enquiries are opened into some tax returns and claims. Further information is collected to help HMRC understand your figures and to check that they are right. This is to make sure you do not pay too much tax or too little. Either way, they will tell you if they find something wrong. During routine processing of Tax Returns, HMRC carry out a full programme of checks, including comparing your tax return with information from various other sources. If HMRC think that your tax return, or claim, may be incorrect, or if they think something requires fuller explanation, they will start enquiries. If HMRC find any obvious mistakes, for example, in the arithmetic, they may correct them without making enquiries but they will send you details of the corrected figures. If you disagree with the amendment, you can ask for reversal of any changes made within 30 days of the date the correction is issued. Once HMRC start an enquiry, its only purpose is to ensure the tax return, or claim, is correct. However, the initial request may identify particular areas on which the enquiries will focus. Local Enquiries
The simplest form of enquiry will be started by your local tax office within a year of the submission of your tax return. In order to see whether your return is correct and complete, if you are self-employed (or a partner in a business), HMRC will need to look at the records of the business. They will usually also want to look at the rest of the return because your overall financial situation may be linked to your self-employment or business. Sometimes the profit of a business may have an effect on other areas of your return such as savings and investments.
You will be told about an enquiry in an opening letter. The person that writes to you about the enquiry (an enquiry officer) will be checking all the entries on your return including for example, turnover, profit, expenses, capital allowances and bank interest. You will be asked to provide all your business books and records to show how you have arrived at the figures on your return. Before a meeting can be called
Enquiry notices will have been issued after a full review is carried out of your local tax office records. An Inspector will identify the information which is to be checked and will then issue an opening letter with a formal enquiry notice (accompanied by the appropriate code of practice) Click Here for more information about
Examples of enquiries
FAQ's about enquiries
COP 11 - Self Assessment Local office enquiries COP 8 - Special Compliance Office investigations
(where serious fraud is not suspected) If you have a chartered accountant acting as your agent, you should give them all the facts because you are still personally responsible for your tax affairs and the accuracy of any information supplied to the SCO. The Special Compliance Office, when carrying out investigations where serious fraud is not suspected, are obliged to treat you fairly and courteously in accordance with the law and their stated Service Commitment" Most taxpayers pay what is due but mistakes can happen. SCO will investigate thoroughly to establish the facts where there is suspicion that an individual or business deliberately pays less than the correct amount of tax or tries to take advantage of a scheme to reduce or eliminate tax liability. SCO do not conduct investigations with a criminal prosecution in mind but towards a financial recovery of any tax, interest and penalties you owe. SCO will investigate any situation where they believe that there may have been a serious loss of tax
or other duties. This includes the tax affairs of individuals, partnerships, companies and trusts. SCO
may take over investigations started in local offices and can include enquiries into the whole Self
Assessment (SA) tax return or specific aspects of it. Further Information:-
COP8 : Special Compliance Office investigations - Cases where serious fraud is not suspected
http://www.hmrc.gov.uk/pdfs/cop8.htm BBC article "Being investigated by the Revenue" http://news.bbc.co.uk/1/hi/business/2968566.stm COP 9 - Special Compliance Office investigations in Scotland
(Where serious fraud is suspected) SCO will investigate any situation where they suspect serious tax fraud. This includes the tax affairs of individuals, partnerships, companies and trusts. SCO may take over responsibility for some investigations started in local offices and in other parts of the Inland Revenue, and sometimes start their own investigations. SCO will liaise with your Tax Office during the investigation and at its conclusion. Whilst the investigation is in progress, they may deal with some or all aspects of your Self Assessment (SA) tax returns. At the end of the investigation, your Tax Office will again take over responsibility for your taxation affairs. The SCO themselves recommend that you approach a professional adviser to represent you during their investigations. You have to meet the cost of engaging legal or other professional representation and you may change or stop using your adviser at any time. Businesses and individuals can take out special insurance to cover the costs of any accountancy work that is necessary during an HMRC enquiry. Further Information:-
COP9 : Special Compliance Office investigations Code of Practice 9 (2005) http://www.hmrc.gov.uk/leaflets/cop9-2005.htm Recommendations for Enquiry Meetings with the Inland Revenue Before a meeting is called, enquiry notices will have been issued after a full review is carried out of your local tax office records. If you already have an accountant registered as your agent with the HMRC, they will also send a separate letter to the accountant requesting the information. This might include a request to see original books and records. Having obtained the information, the inspector will then review the information provided. If the Inspector still has any concerns, he might then ask to meet the client, with his accountant if he has one. Timing of a Meeting
Enquires are begun for many reasons including random selection, comparisons with similar industry and local economy sectors, your trade with other firms and individuals, even tip-offs received. A meeting should not be seen as an unavoidable stage of an enquiry. Meetings should not be requested in every enquiry case. When Not To Attend A Meeting
In some cases it is inadvisable for a client to attend a meeting with the Inland Revenue. For instance, clients suffering from stress or with a medical problem such as high blood pressure or a heart condition should not be obliged to meet the Inland Revenue face to face. A medical certificate might be required to justify such a response. Venue
If a meeting is justified, a number of factors will influence the choice of location: accountant's office; Inland Revenue tax office; the business premises; the taxpayer's home Meetings at business premises may be declined on the following reasonable grounds: potential disruption to business; reasons of confidentiality; lack of a suitable room. | 
