It may not only be your clients who have a problem when HMRC come calling. Below are real examples from clients of 2020 Tax Protection:
New Approach to Large Business
HMRC are taking a very different approach to some larger businesses. To the agent this looks like a very detailed request for information and significantly is voluntary. However, whereas normally it may be considered good practice to supply detailed information only were necessary in this instance there could be a very positive upside to cooperating with HMRC.
These reviews are an attempt to identify the high risk areas in all areas of business and across a number of taxes. HMRC will discuss these concerns and how these risk areas can de made “less risky”. If agreement can be reached the clients are less likely to receive enquiries in future. A word of warning, though, this is a new approach and we need to be careful there is no sting in the tail. Also, this type of review is clearly identified and if you are in any doubt seek written confirmation that this is the type of review being undertaken. Never simply supply information without knowing exactly which statutory authority, if any, is being used.
We previously mentioned the situation where accountants have not been kept in the loop by HMRC as to the full extent of enquiries into the client's tax affairs. A number of cases have arisen this month where they have been informed but have not appreciated exactly what is taking place. This is due to the language being used by HMRC. They are not asking for all books and records underlying a return but they do say they are undertaking a review of the "whole return" and also wish to review the PAYE/VAT records at a visit. Many accountants do not attend PAYE/VAT compliance visits as a rule but would equally never let a client meet HMRC during the course of a full enquiry without being present. Where HMRC state the statutory authority of S9A/S12AC TMA 1970 or para 24 (1) Sch 18 FA 1998 AND mention they are conducting a review of the whole return this is a FULL ENQUIRY and needs to be treated as such.
This episode shows both the need to stress to clients the importance of letting you know of any impending visit and also to see any correspondence issued to the client.
"Accountants and clients need to be aware of the manner in which HMRC may deal with mixed tax compliance checks. Be particularly mindful that they may still call a full enquiry a "compliance check". Make sure you see all correspondence. If you are not, for example the 64-8 agent for VAT you might not be sent a copy of the full enquiry letter being sent to your client for "confidentiality" reasons.
A situation has already been seen where this has happened. The accountant was only told that a compliance check was being undertaken at the business premises to look at company tax and VAT. As he was not the VAT agent they would not say any more. The accountant assumed this was a PAYE and VAT compliance visit and so did not see the need to attend. At the visit the two Inspectors began asking wide ranging questions about the business and the directors personally. They then asked the client to call the accountant and instruct them to have certain records and analysis ready for collection that afternoon. It was only at that point the accountant was made aware that the opening letter to the client had actually launched a full enquiry into the client's company accounts. The visit was far removed from a "routine compliance visit" .
"One of my clients received an enquiry notice into their company accounts. Almost straight away HMRC told me that the accounts were fundamentally flawed and as a result extra tax of £150,000 was due. After an initial amount of panic, a very in depth technical argument followed.
The client relationship became more strained as the client began to wonder whether HMRC was correct. With the support of the Fee Protection insurance to the tune of over £5,000 in fees and some back up technical advice paid for by the insurers, HMRC eventually agreed the accounts as submitted."
"A client rented out over 100 properties and was selected for enquiry. Each property had its own rental agreement and the Inspector asked for each one to be provided together with all of the books and records underlying the business. The Inspector apparently had no idea of the amount of information which was being requested until he received 6 crates in his office. Each property was reviewed and the enquiry lasted almost a year. Fees of over £12,000 were paid by the insurance and there were NO amendments at all once the enquiry was closed down."
