HMRCs, Tax Enquiries.
From 1 April 2009 - Compliance Checks
From 1 April 2009 the four existing Tax appeals Tribunals have been replaced by a new Tax Chamber of the First-Tier Tribunal, with a right of appeal with permission to a new Finance and Tax Chamber in the Upper Tribunal. The new system applies to the whole range of direct and indirect taxes.
Inland Revenue and Customs & Excise are now one entity: HM Revenue & Customs (HMRC). Enquiries and now 'reviews' or visits to the place of business, known as Compliance Checks, are routinely made into all returns made of UK taxes such as Income Tax, Corporation Tax, PAYE and VAT. In many's experience, and in the vast majority of cases, these can feel like intimidation. 'No nonsense' inspections with increasingly criminal implications and so not just civil that they are allowed under. This is perhaps a symptom of Customs & Excise having won the Civil Services internal battle for control over HMRCs and tax enquiry procedural culture. Recent UK governments also allocated extra resources into recruiting 'outside' qualified trained staff, to augment existing resources within Customs & Excise and so HMRC's entire operations. This process has created new specialized offices and conceptual procedures of 'health checking' any given businesses internal financial operations. Today's world politics like international conflicts, reliance on fossil fuels, intervention in the banking sector, and economic recession, will also make their own demands on HMRC and the taxpayer too. Someone has to pay.
In 1997 'Self Assessment' had originally brought to the fore the so called 'DIY' concept of filing one's own tax returns. Many with both time and patience, complete the form despite the loss in quality time! However, where most of the enthusiastic DIY tax filers' come unstuck is when an enquiry or review is officially notified to them and they have no or incompetent professional advice to hand. No matter how idealistic your concept
is of the increasing misnomer that is termed the self assessment tax
regime, think of this:
Are you not in fact, without knowing it, being encouraged to self
certify off your own culpability to all the new array of existing tax penalties in
addition to any tax and interest that might be underpaid? Honest mistakes or otherwise?
Increasingly the answer here is yes. These smart new penalties appear geared to punish all known behavioural traits of taxpayers. From the mild made in haste error, to the naughty, all the way through to the wicked. Those especially hard pressed for time, resources and professional input are at risk. Its a very subtle point that is being made here, and many 'innocent' taxpayers who have so far, cruised through, the UK self assessment tax regime, relatively unscathed, will in time be asked by HMRC to take a long hard look in the mirror. Concepts such as 'suspended penalties' for careless or negligent returns, and promises to 'behave' in future will be formally certified by the erring taxpayers. Bewildering for them too, if its their opinion, that they try and take all reasonable care, to produce a return.
No one inexperienced can handle a tax enquiry or review- fact.
HMRC are just by implication misleading you into thinking you can. All a bit of an illusion here. It is easier to defend one's self in a criminal court of law and sway a judges opinion than for you as a lay person to work through the procedures of a civil tax enquiry. Its that specialized. Not surprisingly, many who are subjected to these enquiries do not have a clue as to their rights; what is going on; or even; what is expected of them from mainly ambiguous requests usually made of them for information by HMRC Inspectors. Result? Unfortunately, usually personal meltdown. Ultimately, all this just works to the benefit of the Treasury's purse. Any perceived breaches by the taxpayer can also lead sometimes, to some very punitive and unfair discovery type assessments. Ironically, however, most breaches are due to the self-assessing taxpayers' negligence or, if you prefer; the enthusiastic amateurs genuine tactical mistakes! Again, this typically results in more tax, interest and penalties being raised than that just in the original year of enquiry. Anything from the usual four to six years prior, during which no similar enquiry was done.
So having on side an experienced professional to fight any attempt by an Inspector of HMRC to 'break' any area of your tax return or importantly the business accounts is a necessity.
Finally, just what is the fair tax? Where is the consistency? Multi-national corporations employing tax specialists, (and enjoying some attractive government taxpayer handout incentives), endlessly try not to pay their fair share, but do bring millions of us jobs, which in turn are taxed at source mainly through employees. Multi-nationally, big business is politically 'a harder nut to crack' if not impossible, or even globally an inexpedient issue to tackle. Recently HMRCs claimed to be targeting them, albeit at the smaller end, of the UK scale. So who takes up any slack here in the meantime? The bread and butter tax cases that's who. Maybe you?
All information given in this section should not be taken as our advice applying to a particular situation that we have not first advised you upon. We accept no liability resulting on your reliance of this anecdotal type information, as fact, when it is applied to any tax, or accounting matter that we have not first professionally advised you upon.