It’s a double-edged sword: accountants are provided with information at the eleventh hour that can raise alarms, and business owners are already stressing over the accurateness of the information that they have provided.
But then, of course, you have HMRC, who can raise enquiries into a business returns at the drop of a hat.
And HMRC have announced that they are still awaiting some 2.5 million self-assessment tax returns. Note that there are strict late tax return penalties!
Nevertheless, it is worth remembering that HMRC is also under increased pressure to adhere to deadlines; hence, a huge amount of enquiry letters being delivered at this time of year.
Fear not, we have put together a list of tips that will help keep a lid on the proverbial pressure cooker should an enquiry letter arrive.
1) Who has issued the letter?
Upon receiving an enquiry notification the first thing you should do is identify which HMRC has sent the letter; it could be the Offshore Co-ordination Unit, Local Compliance or even Specialist Investigations. By discovering the root of the enquiry, you should be able to assess the severity.
2) What are the deadlines
The next step is to ensure that the letter complies with the correct enquiry and assessing time limits.
Any enquiries that fall under Sections 9A and 12AC Taxes Management Act 1970 have to be opened within a year of the tax return being filed.
Just remember that if the return was filed late, or there are any amendments, then the enquiry window will be extended to the nearest quarter day (31st January, 30th April, 31st July or 31st October) to the first anniversary of the date that the return was amended or filed.
3) Are you concentrating enough on the tax returns?
It is important to focus on the well-timed submission of your self-assessment returns and ensure that these are accurate rather than concentrating on an HMRC enquiry into a previous year.
In this scenario, it would be better to communicate directly with the HMRC inspector and ask for an extension on the enquiry than it would be to appeal an overdue filing penalty.
Having to deal with an enquiry would not be considered an acceptable excuse for filing your return late. However, if you contact HMRC as soon as the enquiry letter arrives, most tax inspectors will allow a reasonable extension for the response, considering the time of year and the pressures associated with it.
4) Is the issue straightforward?
HMRC are making a considerable effort to assist taxpayers and their representatives by reducing the administrative workload when dealing with enquiries.
Rather than months of hassle and reams of paperwork, an issue could be resolved with a short telephone conversation. It is also a great opportunity to begin a dialogue with HMRC.
HMRC also offers telephone compliance checks, which are a swift, efficient way of dealing with any concerns that business owners may have.
5) Do you need to provide documents or other information?
When reading the letter, it is imperative that you focus on the content of the letter and, specifically, what information HMRC is looking to see.
Some of the requested information may be irrelevant or it could relate to years which are out of time. In this case, it is crucial to check whether the information/documents requested are proportionate to the matter at hand.
This offers another opportunity to contact HMRC, decide what is relevant, and possibly look at reducing the amount of information required. Again, this could provide you with an opportunity to discuss an extension for providing these documents until the 31st January deadline has passed.
The message here is not to panic. If you do receive an enquiry letter and you’re not sure what to do, then contact a company who are experiencing in advising people with tax investigations like KinsellaTax.