Are you prepared for an HMRC enquiry?

It can be daunting if you receive notification from HMRC. But with the right preparation and proper support, it shouldn't cause you undue concern, writes ANEES HUSSAIN of our tax department.

From time to time, HM Revenue & Customs will send out notices of enquiry, where they deem it applicable, to establish that the information they have received is correct and accurate. Should you receive such a notice, this is not a time to panic! Often these notices are simply there to gain some clarity on a particular disclosure - for instance, were the proceeds from the sale of a property declared on your tax return the amount you received, following completion of the property disposal.

In essence, these enquiries are designed by nature to ensure that your tax liabilities are fully correct. HMRC will normally request documentation or explanations that are deemed reasonable to enable them to check that your tax position is correct. There are usually two types of enquiries: a full enquiry (where a whole tax return is being questioned), or an aspect enquiry (which normally attempts to query one or two specific areas of the return).

Whilst these are generally a rare event, you should be able to substantiate figures that you disclose to the Revenue (whether they're on a personal tax return or a set of company accounts).

So, what does this mean for you exactly? The first thing is to always ensure you have a good running record of the figures that you declare on a tax return. This does not necessarily mean you must keep every single receipt and invoice you have ever encountered in your business/sole trade, tucked away somewhere so secure that even you may have forgotten where that place is! However, you should be in a good position to retrospectively provide evidence for the information you declare on a tax return, when requested.

When an enquiry notice is received, how you respond is crucial to how smooth the process can be when communicating with HMRC regarding their query. You need to establish whether there has been an error on the information you have submitted as, depending on the nature and size of the error, penalties can be levied on any unpaid tax.

Such notices can be rather stress-inducing, particularly if you re not used to responding to formal requests for information. Understanding how to effectively formulate a response to these enquiries is something that requires a great deal of experience and know-how about the enquiry process.

We, at Page Kirk, have a dedicated team of tax specialists, who are well-equipped with responding and dealing directly with HMRC and helping our clients navigate their way through what can be a daunting process. Our team is here to support you in ensuring that all information requests are answered and any penalties mitigated where possible. For more information call us on 0115 9555500 or email enquiries@pagekirk.co.uk.