Time and time again I have pointed out the necessity of getting an expert to deal with a tax enquiry as soon as you receive a letter from the Revenue.
Tax investigation work is specialised.
KinsellaTax are specialists in dealing with tax investigations on all different types and at all different levels. It is absolutely essential you get the right advice at the right time as soon as possible.
There is an article I read in the Mail on Sunday on November 1st 2009; I have re-printed it because I want you all to read it.
A.S. writes: I am undergoing a tax inquiry and Revenue and Customs has asked me to provide property particulars for a house I bought 28 years as a letting investment. The records are long gone, so is this a reasonable request?
L.K replies: For an individual in business, tax records must be kept for five years from January 31following the end of the tax year. This period is extended if there is a tax inquiry, when the records must be kept until the inquiry is over.
For those not in business, records must be kept for one year, again from January 31 following the end of the tax year. In the event of an inquiry, this can be extended until it ends.
Asking for details from 28 years ago is allowed, but if you have not kept the information Revenue and Customs can have no complaints.
Such a period is far beyond the time limit for keeping a record of the purchase price. In such a case the Revenue should accept a fair estimate.
First of all, the writer is going through a tax enquiry with HMRC.
A.S asks whether the request, from the Inland Revenue for particulars of a house that he bought 28 years ago, is reasonable.
The answer from L.K, apparently the personal tax partner at the huge accounting firm PriceWaterhouseCoopers, advises how individuals in business should keep records, which is indeed correct.
He or she then goes on to say that asking for details form 28 years ago is allowed. Well, strictly speaking that is true but what he or she fails to explain is that the Revenue only have a limit of 20 years under the Taxes Management Act of 1970 Schedule 36, which I have reprinted below, so strictly speaking whilst the request might be reasonable the answer should have been sorry you are out date.
TMA 1970 Sch. 36 reads:-
“An assessment on any person (in this section referred to as ‘the person in default’) for the purpose of making good to the Crown a loss of income tax or capital gains tax attributable to his fraudulent or negligent conduct or the fraudulent or negligent conduct of a person acting on his behalf may be made at any time not later than 20 years after the 31st January next following the year of assessment to which it relates.”
In other words, HMRC can ask what ever questions they want. Whether or not it is reasonable or whether or not it is allowable is another question, and only a tax investigation expert would know that.
If KinsellaTax had been dealing with this we would have told HMRC, in no uncertain terms, that they were asking questions dealing with matters outside their remit and it is as simple as that.
Now how much sleep has A.S the writer lost and how much worry has it caused. It must have been tremendous for them to write to the Mail on Sunday to get an opinion.
It would have been much easier to have come on the phone to KinsellaTax and asked us and we would have told them in less than 30 seconds what the position is.
So don’t forget, when a tax investigation is under way or about to be started get an expert because although accountants like to try and cover everything they actually do only specialise in certain things and it is vital to ensure that the accountant you are speaking to is actually a tax investigation specialist.
This is no reflection of course on L.K from PricewaterhouseCoopers but I think the advice given could have been a little more than she has actually given and a little more concise.