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HMRC new powers of investigation - a year on

Almost one year on from the introduction of H M Revenue & Customs (HMRCs) increased powers of investigation, Peninsula Taxwise, our preferred partner for the provision of fee protection insurance, have reported that they have seen a significant increase in the practical use of these powers, indicating that the initial period of re-organisation and training has moved firmly towards practical implementation.

In April 2009, Schedule 36 FA 2008 created a single set of information powers for all taxes. In particular the power to inspect premises, formally the preserve of the VAT Officer, was extended to include indirect taxes, a harsher penalty regime was introduced and HMRC were given the ability to informally check any past, present or future tax liability.

Taxwise have identified four examples of where HMRC are using these new powers:

Single query

HMRC issue a letter detailing bank interest (for example) as per the Tax Return and bank interest as per their third party source and enquire as to the difference.

Specific queries

HMRC issue a letter raising a range of queries, it looks like an aspect enquiry but the questions look at the current year, for which a tax return has not yet been submitted, as well as the most recently submitted tax return and there are no references to the usual statutory notices.

Multi tax review

HMRC advise of their intention to attend the business premises, they wish to meet with the person responsible for the financial records and issue a list of records they would like available for review. They state the review will cover all taxes and that they may have further questions.

Prior year review

HMRC issue an informal letter requesting information in respect of a number of prior year tax returns.

In light of HMRC’s new powers Fee Protection Insurance has never been more important. Specifically in response to the new powers Peninsula Taxwise have developed Taxwise Plus, which has a single, all embracing insuring clause, which quite simply covers fees incurred attending any meeting with HMRC and dealing with any correspondence from HMRC.

By confirming that everything is covered unless specifically excluded, Peninsula Taxwise have removed any ambiguity as to whether the policy will cover a particular type of approach by HMRC. This has also widened the cover in respect of VAT and PAYE Compliance Visits, which Taxwise Plus covers from the outset, regardless of whether there is a dispute.

The Policy excludes fees that you would not normally expect to be covered by a Fee Protection Insurance Policy, including fees incurred in respect of the routine presentation of a client’s affairs (e.g. preparing a tax return) and fees incurred attending the record review stage of a HMRC meeting.

If you would like to find out more about fee protection insurance please click here. To obtain a no obligation quotation please contact Bluefin on 0117 929 3344.

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