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Taxpayer enquiries are becoming more common, but HMRC are frequently “overstepping the mark”,
“There is a misconception amongst taxpayers, and even some accountants, that HMRC will act within their guidelines and the law when carrying out enquiries and investigations”, said Andrew Cowe, Brearley & Co’s tax manager. “However we are seeing numerous instances where that is simply not the case. In such circumstances, it is important that people know their rights”.
“For example, we have seen cases where HMRC have implied that the client is obliged to attend a meeting, and/or they will be penalised for failing to. In fact, it is usually acceptable to deal with an enquiry in writing. Whilst you should always cooperate with an enquiry, precisely how you do so is not something they have a right to dictate”.
“Indeed, rather than being obstructive, if a meeting is not desired we would state that we feel it is actually in the best interests of all parties to correspond by letter. Having time to read and consider the queries carefully should lead to more accurate responses, rather than a hurried answer in a pressurised situation”.
“In some cases we are happy to meet HMRC, depending on the circumstances. However, we always insist on a meeting agenda in advance, which should be followed, and the meeting terminated if HMRC try to depart from it. Indeed, a meeting can be ended at any point if we feel HMRC are acting unreasonably”.
Other examples of unreasonable HMRC behaviour include asking for personal bank statements of directors when the enquiry is into the company’s affairs. “This is an example of what is known as ‘fishing’, i.e. asking for information that is outside the remit of the enquiry. Unless you are confident everything is ‘squeaky clean’, this can lead to further difficulties, either during the enquiry or later. Taxpayers should not be afraid to ask HMRC to justify information requests if they seem to be outside the scope of their enquiries”.
In summary, the message is that you should cooperate with HMRC, but that does not mean giving in to every demand that they make. A competent enquiry expert will be able to guide you as to what they can and cannot have.
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