The new compliance check regime | AccountingWEB

The new compliance check regime

From April 2009, HMRC have started the process of changing the way they approach compliance. Supported by new legislation, we have the new compliance check regime. HMRC have produced a series of helpsheets which explain the new regime but in broad terms, a compliance check is any method by which HMRC officers check the compliance of any taxpayer. To coin a familiar phrase - it does what it says on the tin! However this is not a mere rebadging of the old enquiry regime. HMRC are going to be undertaking reviews not related to submitted tax returns (including pre-return compliance checks) and, perhaps more worryingly, will be looking to use their new information powers to routinely look at years for which the enquiry window has closed.

As with all new powers gained by HMRC, it is important to appreciate the scope of the new provisions which underpin the new approach. It is vital that HMRC do not exceed their powers simply because taxpayers do not understand what the limits are. Equally, it is unhelpful if taxpayers argue against new procedures which are in fact legitimate as this increases frustration for all involved.

The aim of this forum is to share experiences of the new regime - consider how individual officers are using their new powers and discuss whether those powers are being exceeded in any cases. HMRC are also keen to obtain such information and if we can identify any problems with the operation of the new procedures we have the opportunity to feed that information back to the authorities.

What are your experiences to date on the new regime and what are the problems being encountered with the new procedures?

RebeccaBenneyworth's picture

First comment!

RebeccaBenneyworth | | Permalink

I am at the tail end of a fairly simple enquiry but I have been interested by the change of pace since April. The inspector (who is clearly experienced) has really focussed in on the key issues, and is not really interested in following up on minor points, just in resolving the major issues.

This is what I have expected from the guidance issued to support the new regime, much more focus on the major points and no time spent on minor items, but it will be interesting to see whether other contributors have a similar experience.

mileswaterman's picture

That sounds positive

mileswaterman | | Permalink

All too often have we found that inspectors have been spending too much time on items which have little or no tax result.

This will be a more focused approach and would certainly speed the whole enquiry from start to finish.

We could eventually come to a stage when there is an agenda similar to that of a HMRC meeting. Stating the areas of concern at the outset and concentrating on those.

There have to be efficient ways of handling these things to avoid to much stress on the taxpayer. Also saving on professional fees.

Having said that being able to have compliance checks before the return has actually been submitted is very similar to a VAT visit. Although the VAT visit has something to check as it is the returns that are being checked.

If a tax return has not been submitted what are they actually checking?

RebeccaBenneyworth's picture

Risk areas

RebeccaBenneyworth | | Permalink

If you are working on a risk based process, you are looking much more at the underlying process - controls and in some cases knowledge - for example does the trader know the extent of zero rating on new build? Is he likely to confuse himself and apply it (zero rating) to the wrong supplies. This type of approach translates really well to controls where in a cash based business you would be looking not only at the records maintained, but at the controls intended to check whether all sales are properly accounted for.

This is very much like an old fashioned systems audit (sorry, 1980's auditor speaking here) which assesses the process and then tests it and reports back on the adequacy of controls. I think it is an excellent way to progress for HMRC and welcome it. I just need to talk more to my clients about controls - particularly over completeness of income! It's not that I think it's not complete, it's just difficult to deomonstrate that it is!

mileswaterman's picture

Asking an Expert

mileswaterman | | Permalink


as an expert speaker I someone I greatly respect, do you think that it may be useful to setup free seminars
for clients and their guests on the topic "internal Controls for your business" rather than loads of one to ones?

Or will it be a waste of time.

I just thought it may be a marketing opportunity at the same time.

Educating clients

Ros Martin | | Permalink

One of the themes that does seem to emerge from all of these changes is the fact that HMRC want to 'encourage' taxpayers to become more compliant. HMRC officers will then address the risks they see in particular businesses or in relation to particular taxpayers and see how those risks are being managed. Rebecca's initial observation about this might suggest that the targetted approach may well be the way forward.

Following on from this and picking up on the last comment, I think advisors do need to be more pro-active in helping their clients to adopt a more critical approach to the way they run their businesses. I think the idea for a seminar is a good one - you can always then follow it up with individual clients who have issues they want to raise with you that emerge during the course of that seminar.

What do they check?

Ros Martin | | Permalink

In response to the second post asking what do they check if there is no return - the Compliance Handbook gives examples of situations where a pre-return compliance check will be done and this is the basic list:

• to assist with clearances, pre- and post- transaction ruling requests
• where a trader regularly discloses an error (by making a voluntary disclosure) after the submission of a VAT return
• checking the hidden economy where waiting for the submission of an SA return may mean unacceptable delay
• to check the computer systems operated by the taxpayer to ensure that the way in which information is kept will lead to accurate returns being made
• to find out about tax planning and avoidance schemes
• where fraud is suspected

Although they do also comment that a trader could invite a pre-return compliance check too! Not sure how often that will happen in practice ...

I suspect as time goes on, as stated above, HMRC will identify risks and commence a review whenever it is convenient for them to do so without worrying too much about linking it to a specific return.

Sch 36 S9.10.11 Inspection Powers

malcolmrichards | | Permalink

As a Consultant to a leading Tax & VAT Enquiry Insurer and several P I underwriters, I have been talking at various CPD days and conferences and highlighting the areas where Practioners could be exposing their Insurers and there policies to 'pitfalls'.
HMRC (tax) can now for the first time look into current year, old regime was reactive to a submitted return or set of accounts hence the Enquiry window sysytem and all it encompassed. I am looking to see a fall in 'old style' enquiries as the Inspectorate get more focussed. Insurers are going to have to reappraise the covers they offer to meet the 'New Regime' and PI Carriers will be looking at the working practices that there Insureds employ. Educating the Clients is one step 'educating' the Practioners is paramount!

Can't say that I have noticed any change in the handling of case

SimonP | | Permalink

In a current enquiry into a client's annual accounts, the inspector has targeted:

1. Closing Work In Progress.

2. Use of home as office overheads, even to the extent of asking to see the mortgage interest certificate for the year.

What was that Rebecca wrote about HMRC now not bothering with minor items?

Some things will never change ...

Ros Martin | | Permalink

In response to the previous post (been on holiday so just catching up!) I think we will see many old style enquiries for some time to come - there are plenty of old style inspectors still who will find the changes difficult to deal with too. It is very depressing though in many ways when such insignificant issues are being questioned

Sch 36

malcolmrichards | | Permalink

 Six months in to the new regime what experiences if any are 'Praticioners' and clients having?

RebeccaBenneyworth's picture

Sorry, I too went off on hols    1 thanks

RebeccaBenneyworth | | Permalink

I have been away from this group for a bit and just checked in.

Yes, I think the idea of seminars for clients is excellent, and HMRC has provided a PowerPoint for firms to "personalise" and use. It deals with the inaccuracy penalties, but could be a way to raise the issue. I was very interested to hear from a delegate that her firm had written to clients about the new regime and included a link to HMRC's "high level" learning product on new penalties. (This means just the key areas and not much detail). In response one of her "worst offenders" had come forward and asked her firm to undertake bookkeeping services for them as in his words "he was a danger to himself". Now not all can afford this, but I was very interested in the impact that had on the client.

I do think that new penalties is a great way to engage clients with the firm, and you can sweeten the pill with some other nice advisory stuff too if you like. HMRC has leaflets and a PowerPoint (search on new penalties - I'll try and add links later). If there is demand for it maybe I'll write a little presentation for members to use as an alternative? I have also done a couple of paragraphs for you to drop into client letters about "taking care" - these are available on the articles tagged as free resources - there is an orange arrow on the tax page to take you to these.

What's the point

Anonymous | | Permalink

I'm probably missing the point but if HMRC looks at a current year and finds something they think is wrong isn't the answer "That's something we'll look at and adjust if we think it necessary when the accounts are prepared. We won't even consider it until then." I appreciate that VAT has different concerns as does PAYE. Most businesses do not keep records for tax purposes. They keep them mostly to control debtors, creditors, cash, and stock. Tax considerations can be left until the year end accounts are prepared.

But is anyone listening, other than accountants?

SimonP | | Permalink

I can't speak for others but in my case, I wrote to every single client last April advising them of the new penalties regime and even enclosed the relevant HMRC leaflet to emphasise the point.

Basically, none of my clients seems to give a fig and from the records provided to me since I passed on the information, nothing has changed from the year before.

Maybe HMRC should write to their "customers" directly since, after all, it is their regime that is being changed. Maybe then, ordinary Joes will sit up and take notice.

A law unto themselves

BBB | | Permalink

Sometimes when I read posts on this site I wonder whether contributors are on the same planet, because of personal contact with other accountants I know that I live in the real world.  

My experience of changes in enquiries is that Officers are becoming bigger bullies and I expect them to get worse. I think this is due to increased pressure to obtain money, supported by their obtuse superiors who never cease to misrepresent new powers in order to justify the ability to investigate anything at anytime.

If they are under pressure to get a result, and do not have any evidence then they will make up spurious points that will be expensive to deal with, that will never change.


Well said BBB

Anonymous | | Permalink

That's exactly my experience. "Working together" is a joke. It really means "You cooperate, we'll carry on bullying and threatening your clients to get tax out of them they don't owe but can't afford to argue about."


Anonymous | | Permalink

Oh, how I agree with you.

The playing field becomes more unlevel as time goes by. HMRC impose penalties at the drop of a hat, cause us a great deal of unnessary work and admin, and generally make us pay for the privilege of doing their work for them.

Try being one day late with anything, or make a mistake that doesn't get spotted, and an automatic penalty usually applies. Fair do's, late is late and wrong is wrong, but these rules do not seem to apply to the HMRC side of the matter.

We have no comeback for HMRC errors (whether they have 'spotted' them or not) and delays, except more expense, more time wasted, and a big headache from banging our heads against that brick wall.

RebeccaBenneyworth's picture

Replying to above re in year

RebeccaBenneyworth | | Permalink

The issue with the new powers is to enable a much wider range of checks to be carried out. For smaller businesses HMRC are now focussed on records and controls as they have established that the quality of records kept can be poor, and then even if the taxpayer wanted to pay the correct tax he would not be able to. I don't hink that many accountants would disagree - particularly those who deal with small businesses.

If a compliance check established that sales appear to be under-recorded by reference to an in-year visit which looks at the process of recording sales etc, then we have BIG problems, as this amounts to discovery and you are looking at 6 years. So it is sensible to look carefully at even small clients and encourage them to up their game and get better at recording the basics, and laying down some evidence as to completeness of income. This is so much more pro-active than checking the return after it has been filed, at which point you are at the mercy of whatever records there are. I expect to see much more of this type of thing where the risks warrant it.

One or two don't recognise my world from my observations, but I don't recognise yours. I personally have not found HMRC to be bullying and more aggressive than ever, and to be frank if you do you should make a complaint. I quote Dave Hartnett "I will not have zealots in my orgnaisation". If you consider that an officer is behaving unreasonably then you should complain as he MUST only ask for such information as he reasonably requires to check a person's tax position - that is the law. If he takes a bullying and aggressive attitude then complain to his superior.


vinylnobbynobbs | | Permalink

Ther have always been zealots within HMR&C and these new powers will only make them worse. And Dave Hartnett is the biggest one of them all!

Re-opening earlier years

Stuart Bromley | | Permalink

Many clients, especially smaller ones, rely on the accountant to "sort everything out" when preparing the accounts. If they are not VAT registered and have no employees I cannot see why they shouldn't regard what I do at the year end as part of their bookkkeeping process. This does mean that at any mid year point their income record, for example, may be inaccurate. It does not, however, mean that when the accounts and return are completed they will, or ever have been, inaccurate. If HMRC are to look at current year records, how are we to resist reopening prior years because the current unsubmitted year is at that point inaccurate when we know that we have previously corrected such inaccuracies and would do so in future?

A reasonable inspector might accept our statement that such matters are put right when the accounts are prepared but an unreasonable one won't. I think this could easily and frequently become an excuse to set out on the usual fishing expedition with the client pursued until some unreasonable adjustament is acceded to because the client is haemorrhaging fees.

Reality    2 thanks

BBB | | Permalink

Rebecca, I suspect that HMRC may well be aware of your reputation, know you have contact with the people who HMRC staff actually FEAR, and that is why you can keep them in line.

I have made complaints, even had various Area Directors and Grade 6 and 7 Officers lose complaints, delay complaints, answer points completely irrelevant to the actual complaints, admit to “accidentally” giving out information they knew to be false – apparently this was in order to help “guide” me through the maze and the specific information was not intended to be looked at specifically-he was trying to be "helpful", but what they don’t do is answer the actual complaints. The better the evidence against the Officer, the more they bully the client and this has even gone to the extent of sending in bailiffs for outstanding tax that mysteriously occurred when his income tax remittances were accidentally reallocated from his account.Complain to the IPCC about failure to record the complaint, or serious issues involving criminal matters, and HMRC will have already prevented them investigating by listing the complaint as something different and less serious to what you actually complained of.  I know for a fact that the IPCC are fully aware that HMRC do this, and they know that it is to circumvent the rules and prevent the IPCC investigating their activities.  The Ombudsman is a bigger joke.When evidence surfaces of HMRC advocating Officers  place themselves above Parliament to interpret law in ways never thought of, it is surely another sign that the whole organisation needs scrapping.  By hook or by crook is the reality. Anything Dave Hartnett says is just PR.As far as accounts of any business are concerned, I would never send out a set without ensuring cash reconciliations, variances, gross margin, and capital introduced etc were fully explained and evidenced. But, it is often these cases that turn out to be the worst because the Officer knows that he has to be unreasonable in order to get a result that will please his superior, and that is why he wishes to create a list of 200 points asking how such an invoice was paid or what the policy is for returns bla bla bla, all of which were obvious if he bothered to perform basic checks. One Officer actually hinted in detail, five years ago but he is still there and has been promoted, that he had targeted my clients because he couldn’t find any errors and therefore presumed that I was gerrymandering everything from client records to tax returns. It never entered his head that an accountant would spend endless hours helping and advising their clients to prepare accurate records as the best way to protect themselves. But of course, as is privately admitted by many Officers of all ages, all taxpayers are guilty of fiddling their taxes but they just can’t publically say that without first getting the evidence. Many Officers treat the system as good fun, a game, they ignore the pain and misery they inflict and claim that “it is the law” and “if the taxpayer disagreed with the assessment then he could have appealed, we sent him all the leaflets” bla bla bla. Even HMRC Officers who are contemptuous of such fellow Officers, and give hints to you, can’t make a difference within their organisation-what does that tell you.

BBB's Reply

vinylnobbynobbs | | Permalink

I agree

BBB's reply

BCL | | Permalink

Me too.


Anonymous | | Permalink

I agree with all you say and have an additional comment.

Have HMRC sacked (made redundant?) all the competent staff, and kept the cheap (inexperienced) staff?

If HMRC were a business they would have folded long ago.

HMR&C Staff    1 thanks

vinylnobbynobbs | | Permalink

Certainly a few years ago all of the older members of staff were encouraged to take early retirement.

Sir Humphrey’s new charter?    1 thanks

BBB | | Permalink

We will

Treat you as dishonest, believing you are willing to pay whatever we dream up, stop you from appealing or reducing your bill, unless you are an MP.

Respect you to the same standard we treat our staff. We aim to treat everyone the same, but some better than others.

Provide you with inaccurate information, creating extra stress, work and costs for you and our staff, hoping to make it hard for everyone who tries to get things right.

Recognise your right to be represented by someone else, then undermine them as a route to increasing costs and stress on you and thereby destroying your will to resist.

Pursue relentlessly those that break or bend the rules, then promote them.

Lose the information that we hold about you. Expediency and plausible deniability are cornerstones of our Data Protection policy.


What we expect of you


Trust us, we are from the government and are here to help you. You need our help because you don’t know what is good for you.

Give us all your money, even if you don’t have any left. You may think that impossible, but as always you’re wrong and we’re always right. Alastair Darling is printing money and giving it away to the banks so that they can lend it to you, at high rates, in order that you can pay us the money you don’t have.

Tell us if you are going bankrupt, as always we have a leaflet that will help you, we may wish to do it to you before anyone else.

Work with us to ensure your payments are lost within our Super Highend Information Technology systems that you will be paying for in years to come.

Respect our staff, irrespective of whether some are dishonest and reprehensible characters like so many of their incompetent superiors.

Contact us when you need help, advice or support, letting us know if you have particular needs so that we may ensure your risk assessment is corrected, allowing us to ensure that you receive the appropriate treatment.


nigelburge's picture

I have been following the posts here..............    1 thanks

nigelburge | | Permalink

.............and although I do rather think that BBB has gone rather OTT in previous posts, "Sir Humphrey’s new Charter?" certainly contains more than an element of the real world in it, however much the senior echelons of HMRC would like to deny it.

My experience is that unless you are willing to be very tough with HMRC and back it up with a detailed knowledge of the legislation, they will take advantage as a matter of course. It shouldn't be that way but I think that is the attitude that now comes down from the top. The days of Practitioners and Inspectors assisting each other to a common end regrettably seem to have passed into oblivion to the detriment of both sides.

Why does centralisation always seem to result in a worse and reduced service - not only at HMRC but almost everywhere else too?

Rather saddened by all this really..................

Santa, please bring me a simple tax system that goes live in thr

BBB | | Permalink

The charter post is a joke, an exaggeration based upon real experiences and the views of many, that is what makes it so terrible. My previous posts, sadly, are the all too common experiences of many and unfortunately are confirmed.

My experience is that the firmer you are with them, defeating their arguments and quoting law etc that makes their position untenable, then they will be more unreasonable because to get their way they then have no option but to steam roller you-even with specialists at regional level. But irrespective of whether your stance is tough, or even stronger to counter plain bullying, you should not ever need to be that way; especially on basic points that are stupid and only argued to bully the client into accepting a settlement, specifically disregarding the fact that there is no evidence of any underdeclaration.

Centralisation works fine in the private sector, it is the public sector that has the problem. Banks etc manage more complex paper/IT systems far better, and with many more transactions; but they operate in the real world of accountability.  


nigelburge's picture


nigelburge | | Permalink

"My experience is that the firmer you are with them, defeating their arguments and quoting law etc that makes their position untenable, then they will be more unreasonable because to get their way they then have no option but to steam roller you-even with specialists at regional level."

If and when it gets to that stage, an appeal direct to the Commissioners has always worked for me to inject a healthy dose of realism into all concerned.

I have not yet had the pleasure of a trip to the First Tier Tribunal or the "Internal Review" but I suspect either of those would probably have the same effect.

*Living in hope!*

Eoghan2's picture

HMRC and Penalties

Eoghan2 | | Permalink

I agree, we to wrote to all of our clients in late March 2009, enclosing HMRC's leaflet etc. and not one client cam came back requesting further guidance. We now as a matter of course when sending out their tax returns for signature, enclose a further copy of the HMRC's leaflet, advising them to make sure that they have considered any ommissions.

Can I force HMRC inspector to take action?

SimonP | | Permalink

In an effort to show that nothing has really changed, I made a point in this thread a few months ago that an inspector is querying Closing Work in Progress of a client, even to the extent that he wanted to disallow ALL closing WIP "because it is estimated". [The client is a professional who only sells his time. He treats his time records only as a guide as he frequently under/over bills according to the work he has done and the client's ability to pay; hence the "estimate" of WIP]

I pointed out to the inspector that HMRC's own manual states "Stock valuation can never be absolutely precise, with a number of practical considerations affecting the accuracy of the estimate [BIM 33100]".

Not only that but IR233 (2003/04) states that "work-in-progress, like stock, is an accounting concept. It is not for the Revenue to determine how to value it." [I note that IR233 no longer exists but surely the concept remains?]

That being the case, I asked whether a Revenue Accountant had been consulted, since this seems to be an accounting matter. His reply was that he did not think it necessary to do so.

Can I insist that he approach a Revenue Accountant because this is ridiculous?

nigelburge's picture

Ask for an independent review asap.

nigelburge | | Permalink

"That being the case, I asked whether a Revenue Accountant had been consulted, since this seems to be an accounting matter. His reply was that he did not think it necessary to do so.

Can I insist that he approach a Revenue Accountant because this is ridiculous?"

Yes, that is just plain silly - I have heard that the new reviews are currently running at 80% in the taxpayers' favour. You really have nothing to lose and probably common sense will be seen fairly swiftly. Your Inspector may well get his wrist slapped as well - it sounds as if he needs it.

Many local Inpectors are really not at all up to speed on the new faster way of working enquiries so he probably needs a swift kick from on high!


BCL | | Permalink

I recently had a case where an inspector would not accept that interest on loans up to the value of a property when first brought into use in a letting business was allowable. He argued his case (that interest was allowable only up to original cost for months. I eventually threatened to go to the commissioners (it was last year) and suggested he check with a more senior colleague to avoid embarrassing himself. He came back with "the matter is under review by senior technical staff" and eventually conceded the point. It took months and I am convinced the "review by senior technical staff" was a ruse to save face over what most of us would, I believe, think to be an elementary point.

BBB reality post

Anonymous | | Permalink

Yes sadly I totally agree with much of this; having had an enquiry into my personal affairs and a non accounting partnership interest, I ended up having to complain about the conduct of the enquiry.

What was the response - a letter from the inspectors superior telling me that he had reviewed the case and there was nothing wrong with the way it had been conducted - although how he could conclude this I dont know as not only had he got his facts wrong, how could all be just fine, when it took me three letters and sending to the Inspector one of the Revenues own help sheets to get the proper treatment of a claim. Had I not been an accountant (although I do not do much tax) I would have been right royally done over. As it was I had to threaten - and I would have done it too - to go to the Commissioners over every single item being disputed in order to get the enquiry shut down. That worked.

And my ultimate view - they are the biggest bullies on the block! and it is probably the isolated unrepresented taxpayer who gets the full brunt of this - the Revenue seem slightly more wary when there is an accountant to act as a buffer.

Ho! Ho! Ho!

Anonymous | | Permalink

Not a message from Santa - more of a comment on all of the above.

The Twilight Zone meets AccountingWeb!


HMRC are making illegal requests, in my opinion. I'll not help t

SimonP | | Permalink

Ros Martin originally wrote: "HMRC will be looking to use their new information powers to routinely look at years for which the enquiry window has closed."

I have an (aspect) enquiry for a new client where the inspector has insisted on wanting to see previous years' accounts. The relevant tax returns had apparently been filed with provisional figures and no updated figures had ever been presented, although it subsequently turns out that the final results were in fact the same as the provisional profits, albeit numbers needed moving around in boxes. So, basically, the correct amount of tax had been paid.

Now, although I have told the inspector that these years are out of the relevant enquiry windows, he is still insisting upon seeing the accounts.

Having had him query Work In Progress, of all things, I have had enough and told him that his request is illegal as the time limits for enquirying have passed and that if he wants that information, he will have to use Discovery powers and follow the legislation, just like we have to.

I also told him that I will not allow him to ride roughshod through the Taxes Acts with a cavalier attitude. End quote. If that doesn't make him sit up and take notice, nothing will.

Ros' comments have made me ponder, however. Surely I am right and they have no power to look at previous years where the time limit for so doing has elapsed, unless there is Discovery?


So can they?

Ros Martin | | Permalink

In response to the previous post, HMRC can get information about previously closed years if they have reason to suspect that tax has been underpaid.  That wording, in my mind, is a significantly less onerous test that the one under the discovery provisions, when an assessment can be made only when HMRC have discovered that tax has been underpaid (although it has to be said through the years that HMRC and the profession have disagreed on the interpretation of this point!).  THis is what it says in the Compliance Handbook (para 23560) about this:

Having a reason to suspect that tax may have been under-assessed, and so on, does not mean that you already have to be in a position to make an assessment. You will use the information power to enable you to decide what, if any, assessment must be made.

On the other hand ‘reason to suspect’ does not allow you to make speculative enquiries, seeking information merely in the hope that something relevant will crop up. You must be able to identify specific risks.

Somewhere else in the same manual (which I unfortunately cannot find now) it does say that the officer must not use this power unless he could make a discovery assessment which appears to contradict that above instruction.  I will keep looking for the reference and post it if I can find it.

So I think you may have to concede this point although he should only be asking for the information under a formal information notice and if the enquiry has been open since before the change to the rules in April then there are transitional provisions relating to information notices.  At the least he should be pressed on what his reason to suspect is

Ros Martin

Iain Macleod's picture

It is easier for HMRC to get information now

Iain Macleod | | Permalink

HMRC can seek information about closed years- as they could under the old s20 powers. But the process is easier (for them) now.

It's worth a look at the recent Patullo case in the Court of Session. It was about the old rules but the principles are the same. Essentially it confirmed the earlier Special Commissioners' decision in Corbally-Stourton.

Assuming fraud or negligence are not the issue HMRC are only prevented from making a discovery assessment for a closed year if before the enquiry window closed, on a balance of probabilities, an inspector assuming a reasonable level of knowledge and skill and on the basis of the return information could have concluded there was an underdeclaration on the return.

If no discovery assessment is possible then a Sch 36 information notice on the point can't be sustained.

It's pretty easy for HMRC to make a discovery- and therefore an information notice is hard to resist- but you never know.

If this inspector is pressed on Para 21 Sch 36- his reason to suspect- he may back down or at least produce an answer which will make the information request more understandable

HMRC Powers

Emma Neal | | Permalink

Sch 36 now includes the ability for HMRC 'check' into a a persons tax position.

The information or documents they can ask for must be reasonably required to check a person’s tax position but can be into a  person’s past, present and future liability to pay any of the above taxes.  Guidance on this particlular area is at :

  • CH21520 - Information & Inspection Powers: Conditions and safeguards: What we can require or inspect: Introduction

    These powers are much wider than before and it could be argued that the enquiry window is not the guarantee it used to be.  However, we should alll make sure HMRC stick to their own operational guidance in particular make sure that :

  • The use of information powers must always be the most reasonable and proportionate way to complete the compliance check and should not involve excessive demands on a person’s time or other resources.

Watch out too for pre-return checks, HMRC have the power to inspect your clients records with 7 days notice.   Potential problems here include clients who do not have robust records keeping systems and the potential for HMRC to use this information to risk assess your client for an enquiry into the previous year. For example a VAT assurance check in which poor record keeping is detected may result in an IT/CT or even worse Cross Tax Compliance check. 

The number of Cross Tax checks has dramatically increased over the last few months and will increase further next year, These cases include CT + VAT + Employer Compliance, they can include all 3 taxes or a combination of any of the 3.


A lot of changes to watch out for!




John Stokdyk's picture

CIOT report

John Stokdyk | | Permalink

Just to alert you, the CIOT put out a report on its members' reactions to the first year of the new regime. While broadly supportive of the objectives of the compliance regime, the report did raise a couple of concerns.

I picked up those points and blended them with material that was posted in this group. You can see the results in the article, Agents uncertain about compliance checks.

Thanks for all your contributions here - I really couldn't have got to grips with the issues without your help.

Enquiry window

djtax | | Permalink

Do the new rules effectively supersede S9A TMA? If so what's the significance of leaving S9A in the legislation?

Enquiry window

Ros Martin | | Permalink

The new powers supercede the enquiry window to the extent that they allow HMRC to seek information about years for which the enquiry window is closed (rather than having to discover tax has been underpaid so that the year can be assessed).  However there is a limitation to this power as HMRC have to have reason to suspect tax has been underpaid before they can ask for the information.  Under s9A, HMRC can open an enquiry without having any reason ie it is an absolute right (although they will not do so unless a risk has been indentiifed unless it is one of the few random enquiries).  So I think that is why it remains

Ros Martin

Nichola Ross Martin's picture

One year on: Learning together    1 thanks

Nichola Ross Martin | | Permalink

An observation: I have been a couple of Learning Together events on the new regime. The startling feature of each one were that the accountants present wanted to levy much higher penalties than HMRC's officers did.

Under the old regime you rarely saw a penalty in excess of 30% (the highest I have heard of is in fact 45%, but most off 15% to 20%)  under the latest Learning together module one of the examples goes to 75%.

I was at a round table event held at the CIOT earlier in the year and Dave Hartnett categorically denied that penalties would ever be in excess of the old rates. So much for those hollow words.

HMRC staff all say that they have difficulty over the reductions for quality of disclosure - "they are all so similar" not only that but they work in different ways depending on the nature of the offence.

If HMRC are stuck on them then I would suggest that we all doomed!

Virtual Tax Support for accountants:





david5541 | | Permalink

RebeccaBenneyworth wrote:
" I am at the tail end of a fairly simple enquiry but I have been interested by the change of pace since April. The inspector (who is clearly experienced) has really focussed in on the key issues, and is not really interested in following up on minor points, just in resolving the major issues. This is what I have expected from the guidance issued to support the new regime, much more focus on the major points and no time spent on minor items, but it will be interesting to see whether other contributors have a similar experience."

IDEALLY THAT SHOULD BE THE CASE rebecca but we were handling an "old " enquiry case that went on for 8 years? for at least 12 months the inspector was dwelling on  husband/wife "house moves" trying to proove they- or she who has a little salary-were trading in buying and selling! as far as we could see this had no relevance to the point of the original enquiry which was sch d underlying records.

once the inspectors' "manager"/enabler" finally helped in the case then it became more focused and less pedantic and we settled for 16k-under the old procedure of offer for settlement. the inspector said he was a "senior case worker" and therefore technically didnt have or need a manager...........


now its his wife thats suffering

new rules

david5541 | | Permalink


"Do the new rules effectively supersede S9A TMA? If so what's the significance of leaving S9A in the legislation?"


s9a/19a were superceded ages ago;

now its all sample/case risk based and even inspectors dont undertand hmrc 's sampling methods?

a)compliance checks

b)notices-you will never know the extent and intended depth of their work.



david5541 | | Permalink

"I am at the tail end of a fairly simple enquiry but I have been interested by the change of pace since April. The inspector (who is clearly experienced) has really focussed in on the key issues, and is not really interested in following up on minor points, just in resolving the major issues. This is what I have expected from the guidance issued to support the new regime, much more focus on the major points and no time spent on minor items, but it will be interesting to see whether other contributors have a similar experience."

there are still quite a few inspectors getting lost  in and possessive about the inconsistencies of detail.

random or reason to suspect

david5541 | | Permalink

Ros Martin wrote:

"The new powers supercede the enquiry window to the extent that they allow HMRC to seek information about years for which the enquiry window is closed (rather than having to discover tax has been underpaid so that the year can be assessed).  However there is a limitation to this power as HMRC have to have reason to suspect tax has been underpaid before they can ask for the information.  Under s9A, HMRC can open an enquiry without having any reason ie it is an absolute right (although they will not do so unless a risk has been indentiifed unless it is one of the few random enquiries).

" some inspectors who get given random cases dont seem to know if it is a "reason to suspect" or "random" sample/selection   So I think that is why it remains

Ros Martin

long running and then stalled?

david5541 | | Permalink

we had an inspector of afro caribean origin (who came to collect the records in person on his day off wearing tracksuit bottoms).

He quickly turned us against him in the reasonong he applied to a "one ban band/SMALL" second hand car trader for which we do the vats and accounts!

the sort of tracking he did of every single car in the stock book was mind blowing to say the least and like a spanish inquisition for our client who became unwell with worry. we were lucky to refer it on to the ADR process and had a meeting here with the inspector his manager and the ADr facilitator. we then answered in full all the points he felt were unexplaained and after nearly six months now have heard nothing(not even a tinkle) from the inpector with any proposals or response to ours-hopefully he has been relocated.


barbarabedes665 | | Permalink

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Group: HMRC new enquiry powers discussion group
Ros Martin, consultant and share experiences of the new compliance check regime and discuss issues arising from how HMRC are using their new powers.