What's happening with the single compliance process?

Before self assessment was introduced in 1996/7 the inspector had to justify the opening of an investigation. Under SA the taxman was under no obligation to do so and typically did not, explains Chris Chadburn.

Interviewing the taxpayer at an early stage of an investigation has always been a critical objective for the inspector. The absence of candid explanations of the reasons for the investigation and detailed agendas increasingly lead advisers to:

  • provide what was the legally required – usually records and some basic 
  • get written questions from the inspector after the record review
  • consider the pros and cons of an early meeting after considering the answers to those questions

In late 2007 HMRC announced...

Continued...

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Comments

Still operating as seperate units    1 thanks

The Black Knight | | Permalink

HMC&E and HMIT are still operating as separate units..they might share the same building, BUT if you get done for the Vat you get away with the Income tax or vice se versa.

Making Tax evasion profitable even if you are caught! ?

That has been the impression of investigations I have seen and the reading of tribunal cases which leave you screaming "what about the VAT?"

Really is quite sad.

Risks are probably crap

steve2646 | | Permalink

Unless things hve changed significantly since I left HMRC in 2010 their risk analysis teams are well to be frank crap.  Most inspectors were and probably still are too embarrased to reveal the identified risks as they know that they could quickly be explained away without them getting any money.  They therefore go on a fishing trip and fall back on their old favourites which will inevitably include a very thorough cash flow and bank analysis.

There is also now in SME enquiries a greater reliance on information received from the public.  And the inspector would again be too embarrased to explain that he has been told he must open the enquiry because a neighbout is jealous of your new car and expensive holidays. 

So no credible risks put on the table ...

chrischadburn | | Permalink

... minimize co-operation.  

Openness and Early Dialogue through SCP is HMRC's policy and it is only the precise details of how it will be implemented for SME's that is an issue.  It is up to the investigators to explain why they are not being open and if you are not satisfied with their answers take it further.  

Ultimately you may decide to give them what you have to in terms of records but continue to press for reasons for the enquiry after any records review.  Certainly don't agree to a meeting unless you know what to expect.  Get questions in writing and give answers to relevant questions in the same manner.

At some point they will have to put their position on the table.   The sooner the better for all concerned.

Use a meeting to best advantage

steve2646 | | Permalink

I certainly don't agree with the questions in writing suggestion.  This is only likely to prolong the investigation and increase costs.  It is best to have a meeting but advise the inspector at the start that your client will only answer questions directly related to his business and his return.  If he asks, as he will, questions relating to spouses income, private expenditure, the weather etc, make him explain the reason and dont answer unless a question is justified.  Don't under any circumstances get involved in what would appear to be innocent chat, this is not a social event.

At the end of the meeting it is important to ask what concerns he had and if he has any concerns which have not been answered and to ensure his reply is minuted.  Dont allow him to get away with comments like he will now consider what has been discussed.  This is your opportunity to pin him down to precisely what concerns remain and you should make sure you use it.  If there are no remaining concerns then you should make it clear that you expect the enquiry to be closed and get him to minute the reasons if he will not do this.