The Revenue have always had the understandable legal authority to look into a person’s or company’s tax return. In the past, returns were selected for checking on the basis that if it looked incorrect or there was some background knowledge regarding the person who had filed the return, it would be investigated. There has also been a small number of randomly selected returns and the unlucky recipient of an investigation would have to deal with it.

However, in recent years, it has become very apparent that HM Revenue & Customs have moved clerical staff who have been freed up as a result of the quantity of returns being filed nowadays electronically, and put more resources into tax enquiry work. There has also been a policy decision to concentrate on this type of work. In view of the increasingly complex taxation regulations, there is now a far greater chance of a taxpayer falling foul of the weight of regulation, and an increasing risk of even the most completely honest taxpayer being faced with backtax, interest and penalties as a result of some oversight.

There are basically two types of tax enquiry, a simple ‘aspect’ enquiry which will look at some aspect of the tax return, such as wishing to examine dividend vouchers, or having sight of a particular document supporting a source of income.

But it is the second type of enquiry which is most troubling to taxpayers, that of a ‘full’ enquiry. It is the self-employed and corporate businesses who usually face these, and they can take long protracted periods with an overly large and unwelcome amount of time and distraction from the running of one’s business. Very often one is left with the feeling of being persecuted by the Revenue, of having one’s honesty and integrity challenged, and they can be extremely stressful and upsetting.

Most taxpayers will turn to their accountant for help, and may find that their accountant is unable to provide full resources to assist the taxpayer, as the accountant will be labouring under the weight of work of other clients, filing deadlines and other commitments. The accountant may be inexperienced with dealing with a full enquiry, or may be lacking in confidence when dealing with a particularly zealous tax inspector.

A simple ‘off the cuff’ comment made to the Revenue during a tax enquiry may be taken out of context, or a document or information may be provided - the taxpayer assuming that the officer has the authority to demand it - and the officer uses this to make a dubious case for arrears. It is then up to the taxpayer to prove these arrears are not due, the onus is not on the officer to prove they are due. Sometimes, in tax cases such as this, it is very difficult to prove innocence, and many taxpayers have had to pay tax they were never legally due to pay but for an innocent remark or information taken out of context.

So who can the taxpayer turn to for a second opinion, or advice or even someone to act for the taxpayer in handling the tax investigation?

There are people who specialise in this sort of work and can now be called upon. Of course, due regard has to be taken of the cost versus the tax at risk.

And also regard must be taken of when to call a specialist in to help. Certainly the best time is right at the start of an enquiry, although this may become an unnecessary expense if it only takes a couple of letters to sort out the problem, something the accountant could do. But it will usually be too late to call in a specialist after an examination of the records, an interview and a presentation of the arrears of tax by the Revenue, and they may well not have even mentioned any penalties or interest due by this stage!