Nicholas McLeman discusses strategies to minimise timescales in tax investigations.
As we are all aware, HMRC has access to a wealth of first- and third-party data which drives their risk-based approach to enquiring into taxpayers’ affairs. The majority of HMRC investigations (apart from mandatory random enquiries) are born from the risks that HMRC perceive to arise from this data.
In an ideal world, HMRC investigations would be a relatively brief and painless experience; HMRC would make it abundantly clear what tax risks they perceived to exist, the information relied upon to develop those suspicions would be shared with the taxpayer, and HMRC’s request/s for information and documents would be limited to items reasonably required to address these. The client would then promptly provide all relevant information, HMRC’s concerns would be alleviated, and a final position would be rapidly achieved in agreement between the parties.
Alas, the reality is far from ideal, and it is very rarely the case that an HMRC enquiry will be without pain. Deviations from the ideal path of progression often arise from miscommunications, misunderstandings, unnecessary delays, a particularly aggressive or inexperienced HMRC officer or even a defensive client. These can lead to simple enquiries growing into multi-year long disputes.
Systemic reform of HMRC’s powers and enquiry processes may be a worthy conversation for another time. However, our immediate responsibility lies in what we can do to reduce timescales and to secure timely and commercially acceptable outcomes for those we represent.
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