How to prevent a discovery enquiry?

How to prevent a discovery enquiry?

Didn't find your answer?

I have a limited company client that has incurred an unusually high amount of expenditure. It is in a category that HMRC would typically focus on in the event of an enquiry.

How much information has to be disclosed in order that the enquiry window is just the normal one? In other words how to disclose so that HMRC cannot invoke discovery and launch an enquiry that would otherwise be out of time?

I was thinking of putting a detailed note in the full accounts. Is this enough or do I also need to write to HMRC with that information?

Replies (3)

Please login or register to join the discussion.

By johngroganjga
13th Sep 2013 10:48

Don't add anything to the

Don't add anything to the full accounts beyond the required statutory disclosure.

The place to provide any additional information is in the CT computations.

I am not sure what you have in mind.  If your concern is that, say, Legal and Professional expenses is unusually high in this year compared with previous years, then that will be as apparent to HMRC when they see the accounts as it is to you. It may be a reason for them to open an enquiry to satisfy themselves that all the expenses not added back are allowable revenue deductions.  But that would just be an enquiry.  It wouldn't be a discovery enquiry.  They can't "discover" at some future date that the level of L & P expenditure is high when it is plain on the face of the accounts sent to them.

So I am not sure where your concern at discovery enquiries outside the normal window comes from.

A good practice to forestall any enquiry at all would be to provide a full annotated breakdown of the expense category in question with the computations.

Thanks (0)
Replying to Ruddles:
Red Leader
By Red Leader
13th Sep 2013 12:20

@John

It's not just the expense category and size, it's also the structure of the transaction, so it requires quite a bit of setting out.

I think what I'm going to do is put a full description in the computation. I've discovered that using IRIS it's Edit/Notes and all the text then appears in the computation schedules.

Thanks (0)
By johngroganjga
13th Sep 2013 12:40

That must be the right thing

That must be the right thing to do.

Thanks (0)