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Help from HM Revenue & Customs?

The Government talk about ensuring that people pay “the right amount of tax”. However, the tax system is so complex that the “right amount” is not always easy to determine. One of the responsibilities of the Revenue is to help people calculate their tax liabilities accurately and they have recently been testing new ways in which they might do this.

First came “enabling letters”. These were sent to sole traders, with certain types of businesses being specifically targeted. Revenue research indicated that a significant number of expense claims are incorrect. These letters therefore covered “common errors that lead to understatements of business profits”. The Revenue say that the issue of a letter does not necessarily mean that they think something is wrong – but receiving one can be worrying.

If you receive such a letter you should contact your tax agent as soon as possible. If nothing else, it is a good opportunity to check that:-

  • business records are adequate
  • any estimated figures are accurate
  • business expenses claims are technically correct
  • all income is included
  • The second approach tried by the

Revenue involved “interventions”. Again these were aimed at selected unincorporated businesses and ranged from brief telephone calls to visits to the business premises for a review of accounting records. You have the right not to co-operate as these interventions are outside the normal Revenue powers of enquiry – but did you know this is the case?.

One feature of these interventions which was particularly controversial was the inclusion of questions relating to income which may or may not have been received in earlier tax years where the deadline for a formal Revenue enquiry had passed. You are recommended not to provide this information. If the Revenue have sufficient information to make a “discovery” about past years, then they should follow the procedures set down in law – thus ensuring that the you have rights of appeal and all other protections provided by that law.

 

 

Date: 2nd July, 2007
Author: Rachel Haddow

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