The Enquiry Process Tax investigations, enquiries, interventions, compliance checks and responses.
Believe it or not, HMRC's checks into whether tax returns are correct have been called all of the above (and more!) in the last 10 years.
Whilst the names of these checks may keep on changing, what the checks are about has not. HMRC want to confirm if the right amount of tax has been paid. Or at least, what they believe to be the right amount of tax.
Most checks will follow a set pattern:
Opening
A letter will arrive from HMRC. This may just ask a few questions (an 'aspect' enquiry), or it may request all your books and records for a specified period (a 'full' enquiry) . The letter may also include a request to visit your business premises (see Inspection Powers for more information).Working
HMRC will then review the information and records. They may write to you asking for more information, or request a meeting to discuss their findings. HMRC will reach their conclusion about whether the return is correct. This may be based on sound conclusions - or upon assumptions they have made.Settlement
HMRC will then ask for any additional tax, interest, and possibly penalties (see Penalties for more information). If you agree, the check will be concluded by an amendment to your return (if there aren't any penalties), or by a contract (if there are).If you don't agree, HMRC will issue assessments, and you will have the right to go to a tribunal to obtain an independent decision.
Seems simple?
At each step of the way, HMRC has powers it can use, information from third parties it can obtain and vast resources at its disposal. An inspector 's work may be nothing but undertaking such checks day in, day out, for years, so he or she will have a wealth of experience and tactics that most people (including most accountants) simply cannot replicate.
The inspector will also be under pressure to ensure he contributes to his or her teams "yield targets" (how much extra money the team brings in to HMRC), and "Strike rates" (how many of the checks result in extra yield). The longer the check goes on, the more pressure there will be on the inspector to achieve yield for the team's statistics.
If you are subject to an HMRC enquiry, we can provide support and advice. For further information please contact us.