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HMRC looks to improve inquiry handling

31 October 2007
Categories: News , Admin
A new approach called 'openness and early dialogue' is to be tested by HMRC between November 2007 and April 2008

HMRC and taxpayer representative bodies have been working together to consider how earlier and more open communication can improve the way HMRC deal with formal enquiries. HMRC say that openness means that they will advise taxpayers and any agents acting on their behalf:

  • whether the enquiry is full or aspect; and
  • why the enquiry has been opened.

Early dialogue is a different process which is likely to have more impact on a full enquiry than an aspect enquiry. It will, however, help the focus of aspect enquiry where complex tax issues or commercial transactions are under review.

At the start of the enquiry, HMRC aim to agree with the taxpayer and his agent an explicit, though flexible, timescale for:

  • an initial meeting, or a telephone call in certain cases;
  • the production of information and documents;
  • the records examination; and
  • a discussion of findings.

The openness and early dialogue tests will explore the possibility of some, or indeed all, of these steps taking place on the same day. Not attending a meeting will not, in itself, be seen as a lack of co-operation.

Following the initial meeting, HMRC will carry out a review of the appropriate records which may be followed by a further meeting to discuss the findings.

At this second meeting the taxpayer and any agent acting will be given an opportunity to answer any questions or concerns arising from the record review. Agreement should then be reached either about the actions required or that the enquiry can be closed.

'You can't knock HMRC for trying to improve its communication process', says Grant Thornton's Francesca Lagerberg. 'For many years we have suggested that it would help if they were more open at the start of an enquiry to help clear up simple matters quickly and this looks like an attempt to answer those concerns'.

She is particularly pleased to see the 'clear statement that if a client does not want to attend a meeting with HMRC it will not be used against him, as in some cases a meeting will not progress the matter appropriately'.

While welcoming an initiative which potentially speeds up the enquiry process, the success or failure of the pilot will rest, says Tenon's Phil Berwick on 'how it is interpreted at ground level by local inspectors'.

He would like some more details in HMRC's note. For example, he points out that saying that the initial meeting, records examination and discussion of findings could take place on the same day, is 'optimistic' bearing in mind that it usually takes a much longer time to accomplish these matters.

Will the pilot therefore be aimed at less complex enquiries? If it is, unrepresented taxpayers are more likely to be involved and this could lead to various problems if the taxpayer feels rushed into agreeing things too soon. It will be interesting to see how the pilot is working after a couple of months.

Categories: News , Admin
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