An inspector calls: HMRC’s new extended powers

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Under its new extended powers HMRC is opening enquiries with more certainty of getting a financial result than ever before, so it’s essential that accountants prepare their clients in advance, argues Phill Robinson.

In the context of mainstream direct tax liabilities of businesses, there has been a massive extension of HMRC’s powers. The new legislation provides for statutorily authorised ‘fishing expeditions’, which means that when HMRC starts an investigation they may already know that there’s something in it for them, so accountants should take steps now to protect their clients and themselves.

Inspections:

What can HMRC inspect?

HMRC can carry out an inspection of business premises (which includes vehicles and parts o...

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09th Feb 2010 12:54

Can HMRC demand a series of oral replies aka a meeting?

Quote: HMRC’s Richard Davey has said: “It is not intended that this amounts to a right to demand an oral reply to a question…a person refusing to answer questions will not incur penalties for obstruction”

Is this quoted in any official HMRC documentation please?

Over the last year, HMRC have taken a far more agressive stance on meetings even to the extent of threatening increased penalties for non co operation citing page 4 of IR160 which states

“Co-operation - A reduction of up to 40%. If you supply information quickly, attend interviews, answer questions honestly and accurately, give all the relevant facts and pay tax on account when it becomes possible to estimate the amount due, you will then get the maximum reduction for co-operation." 

This is at odds with page 11 COP11 that states 

“You do not have to attend any meeting, but we will expect you to provide promptly any information we consider essential to our enquiries. Meetings allow you to clarify and explain any points you think we may not have understood, and ask questions as well. If we believe that correspondence will not be an adequate substitute for a meeting, we will make this clear to you." 

Even the last sentence gives them the door to a meeting. 

What powers do HMRC have to insist on a meeting and what defences are available? 

The problem with meetings is not that the average client has anything to hide (although sometimes they may give an answer that may confuse the issue and actually be a red herring that HMRC can jump on). The main factor is that many HMRC Officer’s no longer have the power to agree to any orally negotiated adjustments and are often overruled by Line Managers resulting in a lack of certainty and a feeling that time has been wasted. Whereas anything put in writing should be after more thought and consideration and would be harder to withdraw.

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