Dealing with HMRC enquiries

In the light of increased pressure on HMRC to increase tax revenues, it is expected by many commentators that HMRC will increase the use of risk-based approaches to reviewing income tax and corporation tax returns and accounts. It has been suggested that this will result in increased enquiries and investigations by HMRC.

If HMRC decide to open an enquiry, it will commonly be an “aspect enquiry”. This is simply an enquiry into one or more particular aspects of your tax return or accounts.

Issues which may give rise to an aspect enquiry include:

  • bank or building society credit interest omitted from a return;
  • employment benefits omitted from a return;
  • changes in tax sensitive costs (e.g. legal fees) in accounts from year to year
  • changes in key ratios and statistics

In most cases, it should be possible to deal with an aspect enquiry promptly and efficiently. As long as a comprehensive response is provided to HMRC, there is no reason why an aspect enquiry should be a lengthy or stressful process.

More extensive enquiries may take longer to resolve, but at all times, it is important to respond in a timely manner and as constructively and comprehensively as possible. It may be appropriate to conduct meetings with HMRC, depending on the circumstances.

Penalties for submitting an incorrect return can be substantial depending on the type of error and the reason for it. The overall amount payable can be significantly increased by penalties and it is therefore essential that any enquiry is handled correctly. HMRC will take into account a number of factors when assessing penalties, the most important of which are usually:

  • whether the error was an innocent mistake;
  • whether there was any attempt at concealment; 
  • conduct of the parties during an enquiry.

Our directors and tax team have extensive experience of assisting in HMRC enquiry issues. We aspire to a productive relationship with HMRC, but will always advise clients constructively and objectively. We will always present the case to HMRC robustly and vigorously.

In many cases, we are appointed as a direct consequence of the commencement of an enquiry, and this will be the first matter that we deal with. In other instances, we have been appointed as special advisers, to assist only in relation to the enquiry.

If you require advice or would like to discuss how we might assist you, please contact us.