Tax return random checks

Stephen66

Hi, I had a daunting letter from the IR saying they wish to do a check on my tax return. Are there any web sites with advice on dealing with this, or do you have any advice or experience? I have an accountant but he seems to be using this as an excuse to make money! It's bad enough I had to pay him to do the return the first time, but now I am having to pay him a second time to prove he did it right in the first place! This seems a bit unfair and I am told you cannot claim the costs of the check. Thanks.

WHA

Stephen66 wrote:

It's bad enough I had to pay him to do the return the first time

What, you'd like him to work for nothing???

Stephen66 wrote:

but now I am having to pay him a second time to prove he did it right in the first place!

The Inland Revenue have a right to demand more detailed information, explanations, copies of documents, etc to prove the tax return contained the right information. They will be checking that the accountant has properly declared the information you gave him, and that the information you gave your accountant was accurate and complete.

If there is nothing wrong with the tax return, it should take very little time, and therefore, not cost you much.

If the Inland Revenue drag their feet, start being unreasonable, etc., you do have right to compensation from them.

If there is a problem with the tax return and it is the accountant's fault, you can sue him.

If there is a problem with the tax return and it is your fault, it will cost you.

I would strongly suggest that you work "with" your accountant to make sure that there are no skeletons in the cupboard - i.e. go over everything and if there are any problems, tell the IR before they find out - they take badly to "discovering" things themselves and are a lot more "easy" if you are open and upfront about anything amiss.

telly-addict

Here's the Revenue code of practice for enquiries:
http://www.hmrc.gov.uk/leaflets/cop11.htm

that should answer a number of your questions.

Is it a general enquiry or is it asking for specific information on certain aspects of your return? As said before, it is worth going over the return with your accountant in a meeting to double check the information you have already provided, in case you come across something that has been missed off.

The change to Self Assessment (SA) means that you don't provide nearly as much information in the way of supporting documentation as you used to, so this is an opportunity to provide it at a later date. This may be capital gains tax calculations in full, schedules of dividends received, analysis of interest from various bank accounts, all the things that in the olden days (!) we provided in schedule form, and which for SA are shown as totals.

So it doesn't necessarily mean that your accountant has made a mistake. Your return could have been chosen randomly for inspection or, alternatively, the Inspector wants to reconcile (say) details of bank interest he has received independently to those declared on your return.

roger56

I know this is no help to Stephen66 now but you can get insurance for such investigations. There are conditions and obviously once the investigation starts it's too late. Costs around £120 per year.
Check here for one example http://www.abbeytax.co.uk/
My accountant includes it in business expenses so it gets tax relief.

Penny-Pincher!!

Hi Stephen66

My BIL has just had an Inland Revenue enquiry which has just been completed after 13 months and know it has been very stressful for them. His was made at random.

He has an accountant which he has used for 18 years, but there is really nothing they can do when something like this happens. Although you pay him to look after your finances..you still sign on the line when asked by him, which leviates all liability from accountant to you :eek: I never knew this before this happened.

Anyway, he had to provide all bank statements, all credit card statements, morgage details, all loan details, chequebooks, savings accounts, phone statements, work diary, receipts from everything, holiday receipts, Car/Van HP, even receipts of when they socialised :eek:

They wanted details of above on both business and personal.

It was awful and there whole life was basically put on hold for a year! They were told that each discrepancy they found was a £3000 fine on top.

Anyway they have just got there bill and it didnt just include that tax year but the 3 previous too. They were hit with a sizeable bill so they are going to have to re-morgage.

Just be honest with them! The more open you are the more leniant they will be with you.

I wish you much luck

Penny-Pincher!!
XXX

roger56

Penny-Pincher - Yes, one absolute is that each tax payer is personally responsible for for your tax returns, not anyone working on your behalf such as an accountant. So insuring can at least provide some financial back up for lost work hours etc for certain conditions.

However a good accountant should guide you through the tax maze (VAT and Income) and be in a position to ensure you only pay the tax you are required to pay.

Also do remember to keep your last 6 years of accounts / bank statements / invoices etc.

nemo183

Have they offically told you they are going to launch "an enquiry/investigation", or do they just have some areas of concern that need clarification?

If they intend to launch a full scale enquiry/investigation then I'd suggest you find, without delay, an accountant who is familiar with dealing with this situation. Don't, whatever you do, and no matter how snowy white your accounts might or might not be, enter into any dialogue directly with the inspector - get your new accountant to deal with it.

Finally, whatever it is they ask you/your accountant, never, never, ever tell them a direct lie.

Remember, the individual dealing with your case will also probably also be doing the same with around 20 other people and sets of accounts - they probably have bigger fish to chase, and will be under pressure to conclude your case as quickly as possible.

I've endured 2 of these wonderful experiences, largely brought upon me by carelessness on the part of my accountant.

Whilst it's important to remain civil, you need an accountant who won't allow themselves to be bullied. You need to provide any information asked for in a timely manner, but never more than exactly what is asked for. Never attend a meeting without your accountant being present.

They can ask to see just about any company or personal financial statement or transaction.

However, if they are simply making a check on your tax return, and your accountant has filed it, although it's still your responsibility, if he's made an error the world will not end, and they will probably be reasonably sympathetic - they do have some leeway in how the matter is resolved.

The only problem will come if there's been a deliberate attempt to avoid paying tax, rather than a computational error. Or if you are caught up in a creative scheme to counter IR35 regs. If either of these could be the case, I'd get another accountant to sort it out - this at least looks as if you are taking action to sort things out.

On the other hand, it really could be just a random check, and you've nothing to be concerned about.

P.S. Last tip - if you do get into a discussion about money, and they and you know you owe them something, if they suggest a figure that is less than you think it should be, avoid at all costs the temptation to agree it at once. Thank them for their suggestion, but tell them you'll have to review the figures and get back to them - you didn't think it could be that much. Then just write back and say that you reluctantly agree. You wouldn't believe how much trouble I got into when agreeing a VAT underpayment too quickly.....