Who is in charge of your tax investigation or is it meandering out of control?

Who is in charge of your tax investigation

So many times I hear the answer back “HMRC is in charge of course!”  Perhaps the question is more “Who should be in charge of your tax investigation”.  Either way, the answer should be firstly the adviser is in charge and secondly the taxpayer.  Otherwise your tax investigation can meander out of control.

Shouldn’t HMRC be in charge of your tax investigation?

No.

HMRC needs to be kept under control.  There can be occasions when HMRC oversteps the mark and perhaps asks for something that they are not entitled to.  I have attended many meetings where HMRC simply ask for a document or an explanation which is simply not relevant to the matter in hand.  Not knowing any differently, most taxpayers will simply hand it over.

Only the taxpayer subjected to the investigation can be asked – not their spouses etc. – and for the year(s) specified.  It is imperative that the investigation does not meander.

But there is nothing to hide?

That is arguably irrelevant.  HMRC is there to police the tax system under their care and management role.  They are not there to ask countless questions which leads to more cost to the taxpayer (in terms of incurring unnecessary professional charges).

Is HMRC entitled to ask questions?

Yes but not just any question otherwise it becomes a fishing exercise.  Putting a matter into context is one thing but going over the top is something completely different.

Is HMRC entitled to  ask for documentation?

Yes providing it is relevant to the matter in hand.  Moreover, they have formal powers under Schedule 36 Finance Act 2008 to seek such documentation which the taxpayer does not.  That said, the operation of such formal powers should not go unchecked either.

What can be done if HMRC go too far in a letter?

There is no harm in asking HMRC to explain why something is necessary before it is handed over.  That is why the adviser should be in charge of your tax investigation.

What can be done if HMRC go too far in a meeting?

Again, experience will tell in most situations.  A well trained Inspector who has been properly prepared for any meeting will be able to justify why they are making that request.

It is rare that an adviser will seek a side meeting with HMRC without the taxpayer being present.  Anything that needs to be said (good or bad) should be said in front of the taxpayer.

Who side is the adviser on?

This should never be in doubt – the taxpayer’s side.  That is not to say that the taxpayer is always right (if only!) but the taxpayer needs to be properly prepared and represented throughout the whole process.

How long should a tax investigation go on for?

A good question with no simple answer.  But what a taxpayer doesn’t want is a never-ending tax investigation that is meandering out of control.

In my experience, taxpayers should think in terms of months if not a year or more, not days and weeks.  It will obviously depend upon the facts but so many times taxpayers underestimate what legitimately needs to be done tempered by restricting an over enthusiastic Inspector.

What can be done?

If your tax investigation is out of control or you feel HMRC is in charge, please contact me to see what can be done.

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