January is a funny month. The festive celebrations have been and gone. A lot of taxpayers turn to filing their Self Assessment Tax Return by the end of the month. Others are simply looking backwards and forwards and thinking how are they going to fair in 2022. So why is now possibly a good time to push for a Settlement if you are under a tax investigation?
The light at the end of the tunnel
HMRC is similar to most businesses in that it is accountable and its performance is measured each year. Various government departments are involved in the process but the key fact is that the period stops at the end of the tax year, i.e. 5th April.
So depending where you may be in your tax investigation, you might want to push for a Settlement to coincide with 5th April. That way an Inspector may wish to be slightly more accommodating in reaching a Settlement than at any other time of the year as the Inspector’s performance will be measured in terms of how many cases were started, how many cases were concluded and what was the yield (the value of the Settlement). Whether the Settlement has been paid or not is almost irrelevant.
The emphasis is on push not rush – any Settlement has to be on a firm basis.
At the end of the day, taxpayers want to do everything they can in order to reach a Settlement at the least financial cost possible.
Why January as opposed to any other month?
Experience shows that even if all the relevant facts have been identified there is often still some way to go before a Settlement can be agreed by both the taxpayer and HMRC.
In a typical case (if there is such a thing), it can easily take 3 months to finalise matters with all the facts on the table, hence the need for a push in January.
Does that mean that a better deal can be achieved?
Any “deal” is encompassed in a Settlement Agreement and is based on applying the tax legislation to the facts of each case. That said, we are all busy people and have multiple demands on our time. An Inspector is no different in this regard. By co-operating (helping, telling and giving), the taxpayer can be assured to be in the best position they can to bring their tax investigation to a close.
You can only imagine that at the other end of the spectrum their are cases that may wallow and take even longer to conclude. This is reality and despite HMRC wanting to treat all taxpayers evenly and fairly.
What can be done if a Settlement is not in sight?
Firstly, are you sure that is the case – has anybody spoken to HMRC specifically about a timetable to reach a Settlement?
Secondly, it is often surprising what can be achieved if everyone is focussed on the same goal.
Do you need some additional help?
Sometimes bringing in another adviser to push matters along can help. However, the timing must be right (i.e. all the fact-finding has finished) and there is a genuine willingness on both sides to work to a conclusion by a given date that is acceptable to both sides.