An enquiry into a person’s self-assessment tax return is commenced by the issue of a Notice of Enquiry raised under S9A(1) Taxes Management Act 1970. For tax years up to 2006/07, the notice must have been received by 31st January following the end of the tax year. For tax years 2007/08 they must have been received within twelve months of the date the return was filed with the Revenue. This time limit is important, as notices received after the window of opportunity for the Revenue to launch an enquiry are invalid. Thus, without some form of ‘discovery’ by the Revenue of tax irregularities, there is some mechanism for the taxpayer to consider his/her tax affairs as being finalised for that tax year.

No reason has to be given by the Revenue as to why they have opened an enquiry.

The Revenue may well, with that notice, issue a letter demanding to see the books and records of the business, and may ask various questions. Some information the Revenue has the legal right to ‘demand’, such as the primary books and records of the business, business account bank statements, detailed profit and loss accounts and so forth. However, some information may be ‘requested’ which the Revenue are not legally empowered to demand, such as sight of private bank statements, building society accounts, notes, memos, diaries and so forth.

Information which the Revenue is not empowered to ‘demand’ may be shown voluntarily, or refused. Sometimes it may be wise to show it, often it is not. This is where specialist advice can assist. The attitude of “I have nothing to hide so I have nothing to fear” is a dangerous one, and has cost many taxpayers unnecessary ‘additional’ tax which was not truly due (although became legally due as the onus is on the taxpayer to prove it is not owed) after unwisely showing the officer some piece of information he/she is not legally entitled to demand. If the taxpayer refuses to produce, then the Revenue can issue a notice under S19A TMA 1970 requiring production of the information. The taxpayer has the right to appeal against this notice and the argument can be brought in front of the General Commissioners for a decision.

Once it has been decided that the Revenue can see certain documents and information, where should they be sent? Many people send their information in to the tax office, many don’t. The legal obligation on the taxpayer is to ‘produce’ for inspection. Those who don’t send information in to the Revenue produce their information at their place of business, or their accountant’s office. Again this is an area for which advice should be taken. Sending in to the tax office will mean that the enquiry officer will have a leisurely time looking through every scrap of information for the slightest anomaly. Producing them at one’s own or one’s accountant’s office often results in a visit by two officers demanding a large amount of photocopies and information, sometimes by bullying tactics. It is important not to be bullied or intimidated. Again, specialist help and advice can be sought.