Anything and everything – well that is what it feels like!
There is no “list of questions to be asked” held by HMRC. That said, through experience, HMRC investigators will identify several probing questions and further follow up questions. HMRC believe that such questions are successful in getting to the bottom of matters whenever a taxpayer’s past tax comes into question.
Preparation required in advance of meeting HMRC
It is important that a taxpayer is quizzed by a tax specialist in such areas prior to any meeting with HMRC. A tax specialist will be able to guide a taxpayer when not to answer a question and how to answer a question.
For example, it may be that HMRC asks a misleading question that should not be answered. In such a case, the question itself should be challenged before the taxpayer answers it.
The question may be perfectly clear, but the answer given by the taxpayer is not, or the taxpayer answers a different question to the one that was actually asked.
For this reason, the taxpayer needs guidance from a specialist and experienced adviser prior to a HMRC meeting.
The “ground rules”
Logic and HMRC do not always fit well together. Consequently, a number of “ground rules” need to be borne in mind, such as:
- The question must be relevant to the matter(s) being discussed and the outcome/answer must also have a potential or actual UK tax consequence.
- The question may be unfair. There is a limit as to how far back an individual can remember accurately. Memories may need to be refreshed or the answer may need to be researched. In which case either no answer should be offered, or it should be given with an appropriate caveat that more research is needed.
- The question may be asked of the wrong person.
- The question may be asking for an opinion and not of fact.
HMRC will note both the question and each answer. Rarely are the questions put in writing before being asked. Care needs to be taken in reviewing the record of both the question and the answer.
Who is in control of asking the questions?
Normally this will be HMRC. The role of the adviser will be to listen and intervene only by exception.
Who should be in control of asking the questions?
HMRC may have an Agenda which may or may not be circulated in advance of any meeting. Whilst HMRC will want to have answers to all their questions, the adviser should control when and how the questions are asked.
Who should be in control of the answers?
The questions themselves should do no real harm – but the answers might! This is why it is imperative that a specialist adviser is there to support the taxpayer.
If an answer is given that is clear and answers the question, HMRC will take the answer to be a statement of fact. So, if an answer needs to be researched further, this should be stated at the time. For example, if the answer is that “the taxpayer drives to work”, it could be assumed that the taxpayer never walks to work or travels as a passenger or by another mode of transport.
Whereas if the answer was “the taxpayer regularly drives to work because of the lack of public transport except when a colleague offers a lift” may be a more accurate response. This may be an extreme example, but it is offered by way of an illustration.
All questions must be clearly put and relevant to the matter in hand. All answers should be unambiguous, full and concise. An accurate record needs to be made of all the questions and their answers and agreed by all parties in attendance.
It is always best for the taxpayer to seek advice from a professional adviser who is experienced in such matters prior to any HMRC meeting in order to prepare for the types of questions that may be asked and the responses they should give.
If you or any of your clients are facing HMRC in a meeting and need advice and support prior to, during or after a meeting, then please contact me.