Receiving a closure notice from HMRC advising that their enquiries are concluded, and that the client has no additional tax to pay is like winning the lottery in our office – the only difference being it’s a lot more likely to happen!
In this regard, we won the lottery this week for client whose 2017 tax return had been under investigation by HMRC for a considerable time, before his frustrated adviser decided that he was banging his head against the wall and asked for our help.
Background
In this particular case, the inspector had asked lots of questions and been provided with lots of answers, information and documentation, but persisted in asking further questions without, in our view, any justifiable reason to do so.
Our approach to HMRC enquiries is simple. If HMRC ask for something that is reasonably required for their consideration of our client’s tax returns, we provide full answers and documentation to help the inspector understand the position, and address his concerns.
However, anything not reasonably required, or otherwise outside of HMRC’s statutory scope to obtain, is challenged.
Unfortunately this is an increasingly common occurrence, with inspectors feeling that that they have the right to ask any questions they like, without sensible reason. A couple of intrusive examples in this particular investigation were HMRC asking for the names of the schools attended by our client’s children, and how much money the family had spent on holidays for the last five years. All of this without the inspector being able to demonstrate that our clients returns were in any way inaccurate or incomplete.
Closure notice application
The case was heading to Tribunal after we applied for closure notices as we believed (rightly) that, despite prolonged questioning, the inspector had no evidence to suggest that our client had done anything wrong.
As mentioned above, nothing significant has been found after various rounds of correspondence to evidence that any tax has not been paid by our clients. As it became apparent that collaboratively working with HMRC would not work, we took the decision to take the investigation out of the inspector’s hands by submitting an application to Tribunal for their direction that HMRC should close their enquiries.
However, after getting as far as providing our available dates to Tribunal for their consideration of the closure notice application, HMRC surprisingly issued the closure notice to our client.
It was clear from this that, as we had been trying to tell them, HMRC must have decided there wasn’t a case to pursue.
Conclusion
Making an application to Tribunal for their instruction that HMRC should close their enquiries is a useful but, in our experience, seldom used tool for any tax adviser to have in his or her kit bag.
It is however important to make an application only when you believe that all reasonable questions from the inspector have been fully answered, to be able to demonstrate to Tribunal that, firstly, every reasonable effort has been made to reasonably conclude the inspector’s enquiries and, secondly, to avoid HMRC being forced to finalise their position by assessment, with all of the complications that go with it.
We are currently offering a free no-obligation case triage service for any issues with HMRC enquiries/disputes. If you or one of your clients are in a similar situation to the above and require some help or would like a second pair of eyes on the matter, please contact info@independent-tax.co.uk or contact 01757 630010.
