tax query

tigi

Thank you for the additonal advice Jimmo, I have looked at the letter to see who signed it, it just says HM inspector of taxes.

I have decided to go along to an accountant before I submit anything, I am 95% sure I have done it all correct, but you never know.

Well all I can do is present what I have, be honest and wait!

jimmo

I’m sorry to say I’m really struggling with this one but, for what it is worth, Inland Revenue became HMRC in April 2005 and some time before I retired in November 2006 the new grading structure had been put into place. However those of us who were already Inspectors of Taxes were allowed to retain our original titles in correspondence.
On that basis it seems quite likely that the person who wrote to is pretty experienced in the job and is unlikely to have followed incorrect procedures.
Apart from that I really think it would be unwise for me to offer any other advice. I would only be guessing about something I have no experience of.
One other thought though.
This is nothing to do with Tax Credits would it?
The Enquiry is under Section 9A Taxes Management Act 1970 is it?
It is not under Section 19 Tax Credits Act 2002?

Mouse1812

tigi wrote: »

Thank you all so much :
OK Mouse 1812, the statment says : "I have questions over your ability to meet all your private & personal expenditure from your business profits I therefore would like to see any bank stamentments and counterfoils from all your personal banking, investments and charge cards".

I would reply "what questions? and what knowledge do you have about my private and personal expenditure?"

This sounds like a fishing trip to me. Your private and personal expenditure was not disclosed on your tax return so how they hell can they know or assess what is was?

Normally HMRC can only ask for documentation which support figures given on the tax return, if these prove incomplete or incorrect they can widen their request, not before. Jumping the gun here me thinks.

Unfortunately the lack of a business account does mean the personal statements will eventually have to be passed over to support the information on your tax return, but make them justify the request first, this is an outrageous abuse of power which should be resisted.

If you have nothing to hide, don’t worry. At the same time don’t let them bully you.

I've asked the boys and girls over at accountingweb.co.uk to comment. There is some good advice above (esp Jimmo), but you may get some more from the accountants.

If you can see an accountant experienced in these matters it might be worth taking some advice on how to proceed, you never know you might have forgotten to claim for something.

Pennywise

Sounds like a trainee, junior, or recently qualified tax inspector looking to gain some practical experience and get a few cases under their belt to work up the greasy pole. It's very rare for an in-depth enquiry like this to be opened from the outset - far more usual for an aspect enquiry to be extended into a full enquiry if issues are discovered.

Furthermore, it seems amateur because it goes against the HMRC own tax enquiry manual which states "You should not tell the taxpayer why the enquiry has been opened." http://www.hmrc.gov.uk/manuals/emmanual/EM1560.htm. Yet the inspector is telling you exactly that, by saying "I have questions over your ability to meet all your private & personal expenditure from your business profits". Doesn't sound like someone who knows what they're doing.

I've suffered a fair few of these over the years and used to find them more difficult to deal with than the more experienced inspectors (like Jimmo above) who tended to be more realistic and not waste time on "fishing expeditions".

These days, I don't take any nonsense, and I would echo Mouse1812's approach above, to turn the tables on the inspector. Write back and explain in narrative why you don't need a level of income higher than declared, that your partner pays household bills, etc and ask that the enquiry be formally closed unless the inspector has any specific aspects of your tax return requiring further information.

That kind of reply immediately scuppers their reasoning for opening an enquiry and puts them on the defensive. It leaves them open to Tribunal closure ruling if you can satisfy their reasoning as they've no longer a reason to keep the enquiry open! You may even find that they do, in fact, close the enquiry - I've achieved that outcome before now, usually upon threat of escalation to the commissions (or today, it's the tribunals who also take a more level headed view and are not afraid of challenging a tax inspector acting beyond their reasonable powers!).

There is a basic right of the taxpayer to be believed - the inspector can't assume that you're lying without grounds to believe that, so should take your word that your household bills and lifestyle are subsidised by your partner without you having to prove it by providing details of your partner's income and lifestyle/home costs.

The worst thing you can do is succumb to their enquiries and give them everything they ask for without question. Some may think that approach would be best to get them off your back and go away, but my experience is that it's likely to encourage them to delve even deeper, requesting even more information and documents. You really have to limit yourself to the bare minimum required to get the enquiry closed. I once had a client who willingly provided their personal bank statements (before they appointed me), and the inspector came back with a list of dozens of transactions (some as little as a few pounds) asking for supporting documentation - it really never ends once they get their teeth into you.

Mouse1812

Pennywise wrote: »

...

it goes against the HMRC own tax enquiry manual which states "You should not tell the taxpayer why the enquiry has been opened."

...

turn the tables on the inspector. Write back and explain in narrative why you don't need a level of income higher than declared, that your partner pays household bills, etc and ask that the enquiry be formally closed unless the inspector has any specific aspects of your tax return requiring further information.

Excellent advice, spot on.

By telling you why he has opened the enquiry the Inspector has given you the perfect opportunity to answer his “question over your ability to meet all your private & personal expenditure” without having to supply anything. Get your reply right and case closed.

chrismac1

Good advice here. Like auditors, the best policy is to give any information only if HMRC are legally entitled to have it AND it is relevant to the case. If either one of those tests fails, keep the piece of information to yourself. Or you can get layers of questions on questions....especially if it does turn out to be someone who is new to the game and trying to make a name for him / herself.

tigi

The level of advice on here is excellent, I thank you all, I have given my case over to an accountant now.

tigi

jimmo wrote: »

I’m sorry to say I’m really struggling with this one but, for what it is worth, Inland Revenue became HMRC in April 2005 and some time before I retired in November 2006 the new grading structure had been put into place. However those of us who were already Inspectors of Taxes were allowed to retain our original titles in correspondence.
On that basis it seems quite likely that the person who wrote to is pretty experienced in the job and is unlikely to have followed incorrect procedures.
Apart from that I really think it would be unwise for me to offer any other advice. I would only be guessing about something I have no experience of.
One other thought though.
This is nothing to do with Tax Credits would it?
The Enquiry is under Section 9A Taxes Management Act 1970 is it?
It is not under Section 19 Tax Credits Act 2002?

I did get tax credits for part of that year Jimmo, I was single when I started to get them, stopped them half way through that year when my partner moved in, I have proof from them that it stopped due to change of circumstances that I told them about.

Mouse1812

Well done Tigi, and apologies for the rude accountants, I'll deal with them next month ;o) - touch busy at the moment.

ps give your new accountant a copy of this thread (just to keep him on his toes hay what)

jimmo

Tigi
As you have no doubt observed, there are differences between how a taxman and an accountant approach a problem such as yours but, either way, I don’t think anybody can be completely confident that they understand what is going on in your case.
My gut feeling at the moment is that there is no place in a traditional taxman’s opening Enquiry letter for the taxman to ask for the information that you have been asked to supply.
However, despite any professional knowledge, I find it easy to believe that those questions would be entirely appropriate for a Tax Credits Enquiry.
Hence my asking whether the Enquiry is under Section 9A TMA 1970 of Section 19 TCA 2002.
Whilst that may seem like gobbledygook to you it could be terribly important so please take another look at the HMRC letter and tell us exactly what it says.
Another small detail that might just give a clue, when I sent an Enquiry letter, I always gave my direct line phone number and, underneath my signature was printed my name and on the next line “H M Inspector of Taxes”.
Did your letter contain the same details or did it only include a call centre number, no name and no actual signature?