Simon Sweetman has been looking at the new enquiry powers that HMRC started using in April 2009, and encourages us and our clients to challenge officers if we think they are behaving unreasonably. In particular, Simon wants to hear from members whether the new powers are working in practice.
Now we all know that Schedule 36 of FA 2008 has made substantial and significant changes to HMRC’s powers, allowing them to make requests for information reasonably required to check the taxpayer's return. As far as Self assessment cases are concerned, this can be done if the enquiry window for the return is still open, or an enquiry into that return is still open, which is as it always was, but also where HMRC has reason to suspect tax has been over or underpaid or too much tax relief has been given for the period.
So the difference here is that HMRC can seek to make such a check after the enquiry window has closed, but must have reason to suspect : this will normally mean that they have information from a bank that differs from what is on the return, or information from some other source that contradicts it. The normal practice in such cases will be to seek to remedy only that figure – unless of course that leads to something else – and not to open an enquiry into the whole return even though there will have been a discovery.
Those of you who do not believe that there have been any changes in HMRC’s attitude to enquiry work would do well to read an article by Simon Norris, Head of the Review of Powers, Deterrents and Safeguards team, in Tax Journal dated 22 June. He is on this occasion writing about safeguards, and encouraging taxpayers and agents to challenge the behaviour of HMRC officers if they think it unreasonable : the Act says that an officer may seek documents that are “reasonably required” to check the return.
Normally, of course, HMRC will want to see originals, and the officer is then entitled to copy or remove those records, but, Mr Norris says, that does not mean that he can insist that the taxpayer makes copies at his or her own expense, nor that records can be taken away for an indefinite period. He also quotes an example where the officer wants to see one year’s records but the available disc contains other years as well : the officer should be ready to consider alternatives, such as a printout of the year’s records or, if possible, an onsite examination.
Simon Norris ends the piece by quoting Andrew Hubbard (this year’s CIOT president) as saying The new powers’ regime has a carefully constructed balance between HMRC powers and taxpayer safeguards. A huge amount of work was put into creating a proper framework of safeguards and it is absolutely essential that taxpayers and agents do use the safeguards where it is appropriate to do so. This is especially true in the early stages of the new regime : rights are there to be used.
Right on, says Simon Norris : and right on, says I.
HMRC has established a forum (chaired by Dave Hartnett, but mainly not HMRC people) to oversee the implementation of the new powers, a forum of which I am a member. What we need is evidence of HMRC (and indeed of taxpayer and agent behaviour) to see how this is working. It is most important that this should come from both sides of the fence.