Tax & Accounting News

Calls for 'interventions' trial to be halted

10/018/2006

HM Revenue and Customs have commenced trials of an alternative procedure to a formal enquiry, described as an ‘intervention’, with the aim of avoiding the often lengthy formal enquiry process. As with the recent ill-fated ‘enabling letters’ initiative, this unfortunately appears to be another example of HM Revenue and Customs’ stated intention of attacking tax avoidance using methods which have not been given proper consideration or consultation.

In an intervention, HM Revenue and Customs will contact a taxpayer and invite him to take part in one or more of the following:

• A record-keeping review
• A risk review, involving completion of a questionnaire to enable HM Revenue and Customs to assess whether the business constitutes a risk to tax revenues
• A ‘self-audit’, in which the taxpayer reviews certain areas highlighted by HM Revenue and Customs
• A telephone discussion regarding amounts which HM Revenue and Customs believe to be underdeclared, with a view to their correction and payment of underpaid tax
• A unilateral adjustment of the taxpayer’s liability by HM Revenue and Customs, where they consider that they hold evidence in support of the adjustment. HM Revenue and Customs will explain the reason for the adjustment and ask the taxpayer why the error or omission was made.
• A health check, where HM Revenue and Customs believe there is a risk of non-compliance

Many objections have been raised to the project, on the grounds, for example, that HM Revenue and Customs have no power to take such action outside the formal enquiry procedures, some taxpayers may not realise that participation is voluntary, or may respond incorrectly to HM Revenue and Customs, without involving their agents, and there may be implications where fee insurance for formal enquiries is in place. Indeed, the Institute of Taxation has called for the trial to be halted, and for its key elements to be reviewed in consultation with the profession.

We recommend that clients do not reply direct to HM Revenue and Customs if they receive such an approach, but that they should contact us immediately.

 

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