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CT Eqnuiry

I am now at the end of a Corporation Tax enquiry. The amount of additional tax payable is relatively small - under £5,000 - although HMRC will also now collect substantial PAYE arrears of which they were already aware but had previously neglected to collect. The Inspector (based in Swindon) has now proposed a settlement meeting (in London) "in order reach agreement over the total liability and to bring matters to a conclusion" to which meeting she proposes to bring a blank letter of offer for signature.

Is this a new HMRC procedure? In over 40 years of practise this is not something I have previously come across. She has already suggested that if no meeting is agreed to, she might wish to consider lookig at other years. Am I being paranoid or is she trying to railroad me ?

Comments and advice will be welcomed


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By Hansa
26th Apr 2012 00:40

Not as unusual as you may think ...

Back in the mid '90's I represented a client at HMIT (Holborn) on a furnished lettings enquiry (5 flats in Eaton Square to give a hint of the sums involved).  The client had been declaring one letting when in fact 4 or 5 flats were let at any given time.  - He was caught when he used the wrong flat number in relation to a given letting.

My firm prepared for the Revenue furnished lettings accounts based on incomplete records and also (unsurprisingly) had to send in 6 years of bank statements identifying all receipts over £5k (rather generous of the Revenue I thought!) ... To cut a long story short the client and I were invited to attend a "settlement meeting" at which a figure of £10k + interest was proposed by the Inspector (failing which she would investigate further, with no quarter given).  I accepted on behalf of the client before he could open his mouth and the "deal was done" ... My own estimate was that the client owed at least 5 times the settlement offer.  (yeah yeah, this was before SOCA & MLR were even thought of). 

If my experience (or rather that of the client) was anything to go by, the suggestion is being made simply because that office has insufficient resources to pursue this for a potentially small additional gain.  Speak to the client, find out if there may be other skeletons in the cupboard and if you think there may be, go for it. Warn the client to say nothing and for him to take his cue from you.  Estimate the total tax liability you think may be due "worst case" and accept anything 'better' than that without hesitation.  Full co-operation etc so penalties should be negotiated at the minimum level. 

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26th Apr 2012 10:31

back in the day
This used to be common for enquiries that weren't purely of a technical nature and are still seen as a relatively quick way of bringing the enquiry to a close. The Inspector is likely to want the client to confirm their are no other irregularities or understatements and sign a disclosure to that effect. I would definitely check there are no other skeletons as Hansa suggests. It is a good way of wrapping things up, I would definitely ask for an Agenda though.
Good Luck

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