Tax Investigation Service

Paul Short Accountant EssexPosted by Paul Short:

One of the services we offer our clients is our Tax Investigation Service (TIS).

Broadly clients sign up at the beginning of the tax year to TIS.  This should then provide them with protection should HMRC lodge an enquiry into their tax affairs.

Should this happen, we make a claim on our insurance protection policy and our fees will be paid by our insurance provider.  There are a range of tariffs depending on whether our service involves the preparation of the personal tax return through to the largest companies we act for, where a bespoke quotation will be appropriate.

Pro-rated tariffs operate if a client engages the TIS during the course of the tax year.

VAT registered businesses can recover the VAT we charge on our fee for TIS.

We deliberately try not to hard sell this service.  Indeed I would sometimes advise a client that they probably do not need to sign up for a particular year, because there is no apparent vulnerability.

We take a huge professional pride in doing our best to make sure that our clients do not experience an enquiry from HMRC.  Over the last year we have the fewest ever claims we have ever had to make.  Most of these were straight forward cases where a client had inadvertently failed to tell us about some bank interest arising.

I know some clients work on the basis that they do not sign up and, if they do experience one investigation over a ten year term, then they might be broadly square with the premiums saved over that time.

I get the logic but I would suggest that they would be better advised to review their position each year.  If there is a year where they could be vulnerable, because of some exceptional issues outside of the scope of their normal operations, then that might be the one year to take out protection.

For most clients I would say it is very much like motor insurance.  One takes out motor insurance each year and hopes that it will not be necessary.  One has to have the protection in place when HMRC lodge an enquiry.  It’s no good having had it for the previous 5 years and then lapsing just at the time when HMRC strike.

This type of protection is not just limited to HMRC enquiries into one’s personal or business tax affairs.  It can cover:

  • PAYE compliance visits
  • VAT compliance visits

There can be a school of thought amongst clients that we do everything right for them and they have nothing to hide and also that HMRC only strike at the abodes of the guilty.  Not so.  HMRC might decide to run a purely random check on someone who is entirely innocent.

Business protection is also likely to cover the personal tax returns of partners (and spouses) and also directors (and spouses), rather more comprehensive than one might initially think.

Having TIS in place can make a lot of difference on how HMRC conduct an investigation.  The first thing I say to them when they have notified us of an enquiry into a client who has taken up TIS is that fee protection insurance is in place.  HMRC then know that we can slug it out with them blow for blow, without money being an issue.

We do our best to minimise the risk of an enquiry and we like to think that is reflected in our claims record.  Nevertheless I feel we are moving into an era where HMRC will be focusing more resource on raising tax (with interest and penalties) on cases involving non-disclosure or under disclosure of income.  It also looks good for them to be able to portray the tax take in their statistics.

I also think that Making Tax Digital will give them more information on tax payers’ affairs and enable them to target vulnerable cases more efficiently.

I would therefore ask all clients to think carefully about whether to take up the TIS, when we issue our invitations in the next week or so.

February 2018

Disclaimer

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

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