In 2008 HMRC embarked on the biggest change in its compliance powers for over a decade – Schedule 36 Finance Act 2008 brought HMRC improved and broad ranging powers to undertake its enquiry programme. A key point of Schedule 36 was its interaction with Section 9A TMA 1970 and Paragraph 24 Schedule 18 Finance Act 1998 - the legislation enabling enquiries into individual and company tax returns respectively. Generally, if a return has been submitted and HMRC wishes to enquire, then it should issue a formal enquiry notice under the relevant section of the Taxes Acts, in accordance with its guidance and Codes of Conduct.
Schedule 36 also allowed HMRC to undertake enquiries in real time, prior to a return being issued for that year. However, increasingly we are seeing HMRC utilise the Schedule 36 powers to undertake 'informal' enquiries. Not simply enquiring about transcription errors, HMRC can issue several pages of detailed questions about a tax return or entries upon it. Without an appropriate formal enquiry notice which provides the safeguards of a code of conduct and the legislative support of Section 28A (closure notices) TMA 1970 then the ground upon which that process is being undertaken would appear to be at best shaky. From a client's perspective does such an informal enquiry preclude HMRC coming back at a later date with a Section 9A enquiry? From an adviser's perspective, is encouraging the client to respond a breach of the duty of care which all professionals have to their clients?
It is essential that any approach from HMRC is dealt with professionally, in good time and co-operatively. That does not preclude an adviser from ensuring that the enquiry process being undertaken is within the legal parameters afforded to HMRC by its extensive compliance powers. 'Informal' requests for information, enquiries into submitted tax returns and requests to participate in meetings to discuss similar matters, must be dealt with as if they are a formal HMRC enquiry and the basis upon which HMRC are acting must be understood before responding. Indeed it is good practice to engage the HMRC officer and understand the risks which have generated the enquiry, something that HMRC are advised to participate in.
An experienced tax investigation specialist can assist you and at the outset save the client and adviser from potentially difficult consequences of acting outside of the law.
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