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Managing risk when HMRC investigates

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8th Mar 2016
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So a client of yours has received notification that they are under investigation by HMRC for tax irregularities, says Anton Lane of Edge Tax.

Alarm bells start ringing. How do you manage your risks, as well as those of your client?

HMRC is clamping down on tax evasion and mitigation. They have many more tools at their disposal now and are growing their tax investigation teams.

And as an accountant, you are at risk. Even when introducing your client to a tax planning expert, you have had a duty of care which you may later be judged to be liable for.

Clients may feel that their adviser – you – should have recognised errors in their tax planning. They may pass you responsibility for dealing with the tax investigation on their behalf, binding you into the risk of high penalties.

Managing risks

If an enquiry has been opened, remember two things. Firstly, it’s because HMRC is fairly sure that something is wrong. Secondly, whatever has been done previously can’t be changed.

So what steps should you take?

1. Review the enquiry

Consider the request for information and what possible tax irregularity it could relate to. You may not learn much from the letter itself – they are usually invitations to come forward with disclosures. Tax investigations experts may be able to help you put yourself in HMRC’s shoes, for a better idea.

2. Internal review

Accountants should consider their client terms of engagement. Has your advice been unbiased, expert and qualified, and free from conflict of interest? Are you the best person to deal with this inquiry, given what is at stake for your business?

3. Managing enquiries

Once you are confident in your position, you can ask HMRC for longer than the requested 30 days to respond, giving you time to review files, analyse your client’s business, establish what tax planning has taken place and meet with your client to discuss potential irregularities.

It may be worth calling the HMRC officer who has issued the investigation, to try and ascertain broad areas of interest. But don’t expect to get much information from them. And don’t give anything away.

Once you have established your facts, hold a client meeting to discuss the risks, documenting your discussion and following up with written correspondence.

Throughout the process, let your client know how grave the consequences can be and how thorough HMRC is in its tax investigations these days. Encourage them to come clean early and be full and frank. That way their risks, and yours, will be lower in the long run.

 

Anton Lane is a tax investigations specialist and managing partner of Edge Tax.

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Anyone Without A Sense Of Humour Is At The Mercy Of Everyone Else
By WellHeeled
21st Nov 2016 02:18

Please may I politely ask the basis of the statement that the HMRC are growing their teams? I ask because I read so many varying reports of what the HMRC are doing. They seem to varying between, doing absolutely nothing, to going into micro detail on tiny amounts.

I understand that a lot of experienced tax inspectors were laid off a few years ago, are these teams going to bring things back up to level?

Thank you for your article.

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