Newth Talks Tax - IR enquiry

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IR enquiry

Davids firm was dealing with an HMRC enquiry, which was proceeding alright except for two issues where he required the advice of AccountingWEB members (see 8 March 2007). The two issues were:

  • HMRC have asked to see the wifes bank statements. She is not a partner of or involved in the husbands business, and no business entries have gone through her bank account. In fact she earns more than the husband and pays most of the home bills. She is reluctant to become involved in the enquiry.
  • The HMRC inspector has asked a lot of questions about lifestyle. This has even extended to asking how much the bread that was used to make the childrens school dinners costs.

Can HMRC insist on seeing the wifes bank statements? And what about...

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05th Dec 2007 14:03

S20(3) Notices
The present day inspector is less likely to be put off by suggestions that they should go for a S20 notice if they want to see banking accounts of parties other than the ones registered for enquiries. In fact this vcould be a dangerous ploy if the inspector is sitting with good information that would enable him to bottom the enquiry in an undesirable direction.

If it is however a lifestyle argument he would have to show the Commissioners that his persistence was "reasonable". This word in the statute allows the "Accountant/Tax Advisor" to challenge any application for a S20(3) notice. They have to be told about the intention to apply for it by HMRC before the formal action is taken.

I would also however add one word of caution in that any application for a S20(3) notice has to be authorised by a senior officer so that if you make the Investigator go down that line remember that the case is going to be seen by a senior official before it goes that far. This might give you a pointer that things might not be as clear cut as you thought.

Whatever you do do not lightly - and without a very searchign meeting with your client - allow matters to go to S20(3) as after it is granted the only recourse for appealing it is through "judicial review". Alternatively of course non compliance would then bring its own particular difficulties.

Of course if the Inspector is only flying a kite then a suggestion that he/she might wish to seek S20(3) notice might just have the necessary effect of making him/her either put up or shut up.

All a question of judgement, negotiation and dare I say it technical knowledge.

If David needs any back up could I recommend that he tries

which has recently been created to provide such back up to accountants without the "Big Four fees"

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