Enquiries can range from an aspect enquiry, in which one or more areas of a tax return are reviewed through to an onerous full enquiry where the entire tax return is checked in detail. While HMRC has the power to select cases at random, this is rare as HMRC prefers to focus its resources on cases likely to yield additional tax, hence the vast majority of cases are only opened after HMRC has identified a tax risk.
It is not uncommon for HMRC to make procedural errors which we can identify. These sometimes appear small, but they can impact on the validity of the entire enquiry.
An enquiry inevitably means HMRC asks for explanations and evidence. This may be requested formally or informally but, key to retaining control, is a detailed knowledge of the relevant legislation; HMRC does not have an automatic entitlement to see anything asked for so knowing a taxpayer's rights, safeguards and boundaries is vital.
Business enquiries may involve a visits to the business premises which can be time consuming and disruptive. This is not an unfettered power to wander around the premises, look at all documents or to interview the proprietor and staff so, again, a detailed knowledge of the rules is essential.
If adjustments are found, HMRC might raise assessments to collect tax for other years, or issue tax based penalties. The rules and case law on this are complex. We have been lead advisor on two of the most important cases on these issues in recent years, Bayliss and Hicks and can guide you through this difficult area. In summary, all types of enquiry should be taken seriously. We can help guide you through the complexities, to ensure that you comply where necessary while preventing HMRC from 'over exercising' their powers, so that HMRC's concerns can be addressed and ultimately resolved.