The officer will bring the compliance check to a close once all the risks that have been identified, either before or during the check, have been addressed.


The result may be that nothing was found to be wrong. However, if the check shows that tax has been lost, the officer will need to consider how to charge the tax, interest any surcharge and possibly a penalty.


Throughout the check it is important to ensure that HMRC’s enquiries remain proportionate to the perceived amount of tax at risk.


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Completing the Check

The taxpayer must always be made aware that a check has come to an end. The final steps depend on the type of check that was being carried out:-


    • If it was an enquiry into a self-assessment tax return a closure notice will be issued together with an amendment to the self-assessment


    • After a VAT visit the taxpayer will be told why tax, interest and penalties are being assessed


    • At the end of an Employer Compliance Review a letter of acceptance will be issued on receipt of a letter of offer


    • After a pre-return check has been concluded a letter will be sent to the taxpayer summarising the action they need to take to file an accurate return.


Advice will be given to the taxpayer on how to improve their record keeping and how to get things right in the future. If the officer thinks that there may be errors that are outside their area of expertise, they will refer the case to check or start a new check.


Any documents that have been removed or sent to HMRC should be returned by them at the end of the check.


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Nothing Wrong

If nothing is found to be wrong with the person’s tax position as a result of the check, the officer should bring the check to an end. This will be done by:-


    • Sending the taxpayer a notice if it is an enquiry into a self-assessment return


    • Telling the taxpayer, in writing if requested, that a VAT assurance visit has finished


    • Writing to say that an employer compliance review is complete


    • Telling the taxpayer, in writing if requested, that a telephone intervention (Targeted Education Enabling and Leverage) has been concluded.


It must be remembered that information gathered in the course of a check will be passed to other sections and they may carry out their own enquiry into the aspects of a return they deal with.


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Something Wrong


If the check establishes that something is wrong it may be the result of an innocent error or the taxpayer may have been culpable.


Innocent Error


If the error n a return arose out of an innocent error and despite the taxpayer having taken reasonable care, the officer will take steps to collect the tax but no penalty will be charged. Interest will be charged automatically from the due date until the date the tax is actually paid.


Culpable Error


If the check shows that tax has been lost payments on account will be requested during the course of the check. These will help to spread the burden of the settlement and reduce the interest charge. Payments on account can also be pointed to as a measure of the taxpayer’s co-operation.


Where appropriate, the check will be extended to establish whether tax has been lost in earlier periods.


The tax lost will be established using a method that is fair, with both the officer and the taxpayer taking account of the fact that this may have to go to the Tribunal for a final decision. The officer will then seek to establish culpability by reference to the taxpayer’s behaviour either:-


    • A failure to take reasonable care


    • Deliberate understatement, either with or without concealment.


Having established the behaviours that led to the loss of tax, the officer will then go on to discuss the level of penalty.


HMRC adopt a flexible approach to completing a compliance check. If they consider that their arguments are weak they will not pursue them but if they have a strong case they will not compromise.


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