A HM Revenue & Customs (HMRC) inspection is the last thing any business needs. If a HMRC enquiry notice does land, it pays to be prepared to make the process as painless as possible.
Farming and other land-based businesses are, like all UK taxpayers, under continuous scrutiny for errors in tax calculated and paid – and the last thing that any farming business needs is the imposition of an HMRC inspection or enquiry.
“A HMRC enquiry can be time consuming, stressful, and ultimately costly. Whilst some enquiries may be randomly generated, some may be triggered by certain items, or combinations of items in a tax return that HMRC perceive as higher risk and choose to look at in more detail.”
HMRC enquiries can take different forms. Where a formal enquiry is raised, then HMRC must deliver a notice to the taxpayer stating this intention and the taxpayer must normally be in receipt of that notice within 12 months of their return being submitted.
In a full enquiry, HMRC will look over all significant risk areas of a return, whilst in an aspect enquiry, their interest will normally be confined to a specific area of the return. Under a discovery assessment, HMRC can open a previous year’s tax return on the strength of new evidence of a disclosure deficiency (and potential loss of tax) coming to light. They can go back as far as 20 years in some cases.
The enquiry procedure could take the form of a telephone conversation or could be a formal meeting or a series of formal meetings.
Top tips for dealing with a HMRC enquiry or investigation:
- Pre-empt and head-off a possible enquiry at the outset by using the allocated white space on the tax return to provide any additional detail regarding any unusual items or particular transactions that could interest HMRC.
- If in receipt of an enquiry notice, ensure that the issue of the notice is within the statutory 12-month window since the tax return was filed.
- Take out insurance to cover the cost of professional advisors’ fees in dealing with a HMRC enquiry on your behalf. The cover is generally quite cheap but can be invaluable as the professional cost of dealing with an enquiry can quickly escalate. This will give peace of mind, allowing the enquiry to be dealt with thoroughly and robustly without the worry of escalating costs.
- Reply to requests from a HMRC inspector quickly and fully, and prompt them if there are delays in responding to you.
- Prepare properly for any meetings with HMRC’s inspectors. Request an agenda or the points they wish to cover, so that you can have your evidence and records ready beforehand.
- Take your own notes of meetings so that you can compare with HMRC’s record. Be sure that anything you are asked to sign is consistent with your own record of events.
- Comply with the inspector’s requests. Goodwill and cooperation will go a long way towards achieving a quicker resolution and potentially more favourable outcome.
- Take professional advice. This will give you reassurance and support throughout the enquiry.
If you have any questions regarding HMRC enquiries, please contact Martyn Dobinson.