Tax investigation tactics

Tax investigation tactics

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Client is currently being investigated. His undeclared rental property has already come out of the woodwork - very embarrassing moment when the inspector dragged the confession out of him like a naughty schoolboy. Now I hear he has been doing undeclared work on the side about 16k. My question is this. How do you handle the inspectors. This one is particularly cocky, holier than thou. Any pointers?
Thanks

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By bernard michael
15th Oct 2012 08:58

You should advise the client to make a full disclosure before the inspector finds out. That may reduce the penalties that will almost certainly arrive.You must impress on the client the dangers of any further revelations of this type and that to reveal everything even at this late stage is the only option. If he refuses resign

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By justsotax
15th Oct 2012 09:20

Entirely agree with Bernard...

its really not surprising the inspector is being cocky, he has rumbled your client and is looking forward to issuing a nice big penalty.

 

You need to get back on the front foot, ensure you (your client) discloses everything....do some of the work for the inspector (tax calcs for any other unpaid/underpaid taxes) and submit together with the appropriate cheque.  Deal with asap, and try to reply to any further corres within a week or two of receipt.  

 

You may want to check the exact position re rental income/undeclared income - there will be expenses relating to these (may be significant in the case of the property) - so ensure the full disclosure includes adjustments for any related expenses.

 

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PJ
By paulgrca.net
15th Oct 2012 10:08

I have dealt with similair situations

It's not about how you handle the Inspector in these situations, but rather how you manage your client.

You do not say where you have heard about the undeclared work on the side but presumably this has come from the Inspector.

You must get the client in and lay the law down. Tell him your on his side but he must give you full disclosure if you are to offer best advice. What he tells you will determine what you do next.

Do not take to heart the Inspectors attitude just deal with the facts.

If the client will not play ball then get your fee's paid and resign.

 

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By imbs
15th Oct 2012 20:22

That's right Paul, when the inspector spoke of 2 mortgages picked up from his credit referencecheck my alarm bells rang and gradually the facts were painfully extracted from the client . That was the first I'd heard of it.
Thanks everyone. Honesty is the best policy!

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By cparker87
16th Oct 2012 00:47

Communication
I would suggest you advise your client to be rather tight lipped and speak only to you during the course of the inspection.

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By imbs
16th Oct 2012 10:58

Cparker87, yes the initial interview was last thurs with a follow up with the wife yest.  Most of the questions were aimed directly at them but from now on I the queries will be comign to me.  you never know what the client would say and drop themselves in it!

 

thanks everyone for advice

 

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By bernard michael
16th Oct 2012 14:16

Under what grounds has the wife been interviewed. Did you agree/attend?

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By Mini Me
22nd Oct 2012 13:42

Continued acting

Nothing to add to previous posts on handling the investigation, which I agree with, just an additional (hopefully helpful) comment for when the enquiry is wrapped up.

Reconsider your relationship with this client. It sounds like he's dropped you in it twice, so do you still trust him - if not, time to say goodbye.

We all have naughty clients, but quite often they are new, or have been a bit naive. This client may have other qualities, but if you've had a long relationship with them, they clearly don't think much of you.

 

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By Malcolm McFarlin
22nd Oct 2012 15:15

VAT man next

Don't forget there may be a VAT implication if your client was VAT registered which will also attract penalties and interest. Any settlement with the Tax Inspector should take into account the VAT on the under declared income.

Malcolm McFarlin

www.mandrtaxadvisers.com

 

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By Jon Stow
22nd Oct 2012 16:54

If a client had lied to me

or deliberately misled me, I would have resigned already. I do not tolerate liars.

I have no difficulty dealing with new clients who come to me having been caught with HMRC as long as I believe they are now being truthful. However an existing client who has proved to be dishonest has embarrassed you and he should get his marching orders.

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By Retired_Accountant
22nd Oct 2012 18:50

Three golden rules

There are three golden rules with tax investigations.

 

1) Whatever the inspector claims, there is no obligation on the client to attend an interview.  Insist that the inspector gives a full detailed and complete agenda for any proposed interview in writing, then reply in writing addressing each point, stating that as you have answered his questions there is no longer any need for an interview.

 

2) Get him to commit what he knows, or thinks he knows, to paper. That way he cant change horses part way through.

 

3) Never ever trust a client to speak to an inspector. Instruct them if telephoned to refer the inspector to you and then put the 'phone down.

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