HMRC tax return enquiries
Posted on 09 May 2013
LITRG urges caution over tax return enquiries from HMRC
Following a recent ‘nudge’ campaign by HMRC directed at high net worth individuals outside of the usual statutory framework, the Low Incomes Tax Reform Group (LITRG) says it has recently seen a letter sent to a lower paid taxpayer, also requesting time-barred information about a past tax return according to Harris & Co accountants Northampton, the specialist small business accountants #accountantsnorthampton
The recent ‘nudge’ campaign aimed at wealthy individuals involved letters from HMRC telling these individuals that their ‘effective rate of tax’ for tax year 2011–2012 is lower than average and asking them to verify this. This is despite the fact that HMRC are prevented by law from opening a ‘formal’ enquiry into tax year 2011–2012, given that the deadline for doing so was 31 January 2014.
The letter sighted by the LITRG, which was sent to a low income taxpayer, requested information about a 2010 tax return, asking the taxpayer, who is a cleaner, to produce evidence of invoices; advertisements placed; a breakdown of hours worked per week and the rate charged; and a summary of booking and appointments.
The letter claims that it was ‘not an enquiry into your return, but part of our security reviews.’
While the LITRG accepts that HMRC have a duty to make enquiries into tax returns, it says: ‘We do not believe that requests like the one above should be sent to unrepresented taxpayers. This is because HMRC have a broad range of formal powers to request information from a taxpayer and such formal powers carry associated statutory requirements and protections for the taxpayer. Informal requests, however, have no such rules and safeguards.’
The LITRG is urging unrepresented taxpayer who receive such ‘informal’ requests to treat them with care as it says this area is ‘a minefield for those without advisers and HMRC’s publications are conspicuously lacking in proper information about taxpayer safeguards and limitations on HMRC powers’.
In this regard, the LITRG has produced a guide to HMRC’s formal powers, including practical information about how a formal enquiry is carried out and what happens at the end of it.
The guide is available at http://www.litrg.org.uk/tax-guides/self-employed/enquiries-penalties-and-debt/how-to-survive-a-hmrc-enquiry.htm
