HMRC have been querying closing WIP (2008 SA Tax Return) for a client, to the extent of even wanting an analysis, and after some correspondence, the inspector is now willing to accept the closing WIP figures, provided he is sent details of the opening WIP amounts:
"In order that a comparison of the closing figure of WIP can be made with the opening figure, would you please let me have a statement of this opening figure. Once a comparison can be made, and if they are comparable to the year end figures, then I will be able to accepty the position as presented.
The issue here is that the previous year's tax return (2007 SA Tax Return) was filed with provisional figures of self-employed profits and the enquiry window for that year closed some time ago. I have previously refused the inspector's inquiry to see earlier years' accounts on the basis that his request was made out of time. [For the record, it should be noted that the accounts have been completed and the final profit figures (which have not been sent to HMRC) agree with the provisional ones filed, so there is no loss of tax to the public purse.]
Since, in my opinion, requesting details of the opening WIP is the same as asking for details of the previous years' closing WIP, this seems just a ruse to look at information to which he is not entitled, as he is surely time-barred from making enquiries into that year without a TMA 1970 s29 Discovery assessment.
HMRC Enquiry Manual at EM5175 states "if you do not take action within the 12 month enquiry period you will have difficulty in making a discovery assessment unless you obtain further information to suggest the provisional figure is incorrect."
Clearly this inspector is pushing the envelope as I have never heard anything so ridiculous in over 30 years of practice as wanting to know about an analysis of WIP or stock figures, let alone wanting to compare one year to the next.
Although I have no wish to be confrontational, neither am I going to allow HMRC to deny clients their rights.
My feelings are that if he persists in wanting this information, I would advise him that I want the case escalated to a higher authority, whomsoever that may be.
He still wants to see the previous year's accounts before closing down his enquiry and I think he is wrong. I am not racking up the hours to inflate my fees as this is a pro bono case and therefore no fees are involved.
Am I being overly protective here or is my proposed course of action correct?