A tax investigation is rarely welcome. Like other intrusions, they happen just at the wrong time. Its unlikely that anyone is prepared for the torrent of questions and the negative impact it can have on business and home life. So what questions should be answered at the outset?
Question 1: How long will the tax investigation take?
Although HMRC is governed by tax legislation, there are no limits on how long an investigation can go on for. That said, there are mechanisms that can curtail an investigation that appears to be never ending, for example, seeking a Closure Notice.
Make sure you have a clear strategy.
Question 2: How much will it cost?
Always a key question. The answer is tricky not least because it is difficult to define cost.
In terms of any financial cost, there may be a additional tax cost that also attracts interest and perhaps a penalty. Such a cost is mathematical and taxpayers should be alerted in advance of the possible rang of outcomes.
Invariably there are professional charges. These will be dependant upon the level of work being undertaken and the terms of any Engagement.
What may not be considered as a cost (and is often underestimated) is the emotional cost. Taxpayers are distracted, grumpy and stressed.
Question 3: How much more information is required?
There often seem to be no limit as to how many documents HMRC insists on seeing. A clear strategy should be developed to ensure that only relevant information that is reasonably required is provided.
When to say “no” is often key to handling any investigation.
Question 4: How many more questions need to be answered?
As with providing mountains of information, there is a limit to how many questions can be answered. Providing the questions are reasonable and relevant to resolving the matter, they should be (i) listened to (ii) considered (iii) responded to – in that order.
Off the cuff remarks that are ill thought out are to be avoided.
Question 5: Who has the final say on how much is owed?
The answer – no one person. If there is a Settlement to be negotiated, then it involves the taxpayer, their agent and HMRC. Whilst there may be bargaining positions to be considered as well as strengths and weaknesses to be weighed up, every investigation has to come to a conclusion.
Question 6: Is HMRC allowed to do that?
Obviously this is a wide ranging question but many of my clients do wonder who keeps a check on what HMRC gets up to. Everyone has rules and regulations to follow and HMRC is no different. For most taxpayers though they want to know in advance what is likely to happen in the future, why and is there an alternative pathway.
If a tax investigation has “lost its way”, consider having fresh impetus/ strategy/ direction.
If the tax investigation has just started, be clear on the path you want to follow.
Either way, good luck.