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SA
ENQUIRIES 2
HANDLING CORRESPONDENCE
26.01.06
The
previous article dealt with the receipt of the opening
letter. This week's concentrates on how to respond to
it - and indeed on the approach to correspondence generally.
Very often much of the information the Officer is seeking
in the opening letter appears irrelevant to the tax
return. It often appears to have been lifted from a
standard checklist, although increasingly Officers do
seem to be at least considering the relevance of the
items in such a list to the taxpayer concerned and targeting
the letter to the individual case. Whatever approach
is taken the information can be split fairly readily
into three categories.
(a) information that the Officer can clearly obtain
under section 19A;
(b) information that he might be able to obtain under
section 19A, and
(c) information that is clearly outside the scope of
section 19A.
Put each of the items of information being sought into
the appropriate category. It is pointless not to provide
information within category (a) although, bearing in
mind the need for the information to be "reasonably"
required, if the information sought is difficult or
time-consuming to supply consider whether there may
be an alternative means that will provide similar information.
If so offer that instead, with an explanation of the
difficulties of giving the Officer what he has asked
for and the reasons why you think that he ought to make
do with what you are giving him. In such circumstances
the information sought is probably really within category
(b) rather than (a).
With category (b) information, consider whether you
are prepared to go to the Commissioners and if so what
are your chances of winning. I usually provide at least
some of the information.
The interesting area is category (c). This can include
information in relation to years other than that under
enquiry, information in relation to third parties such
as the taxpayer's spouse or children, and information
relating to the taxpayer's overall financial position.
The Revenue have no power (other than by issuing a section
20 notice, which needs the consent of a Commissioner)
to obtain such information. So why volunteer it? There
are a number of reasons why you might choose to do so.
You may feel that volunteering it will speed up resolution
of the case and save costs. You may feel that there
is no harm in producing it and that doing so will earn
"brownie points" for co-operation. Fine, volunteer
it and tell the Officer that you do not believe that
he is entitled to it but that you are happy to provide
it.
Be careful of the "no harm" approach though.
My experience is that the more information that an accountant
volunteers the more questions many Officers raise, so
volunteering information that is outside the scope of
an enquiry can prolong the enquiry as easily as it can
help resolve it. For the same reason do not be seduced
by comments by Officers such as "No one has ever
challenged this before" or "Do you think your
client has something to hide then?" Ask yourself
only "In this particular case do I think it is
likely to be in the client's best interest to volunteer
the information to which the Officer is not statutorily
entitled?" If you answer yourself "Yes"
then provide the information. Otherwise don't.
If you decide not to volunteer information, do so politely.
I normally say something like "The information
that you have requested does not seem to me to be relevant
to my client's tax return. However, if on reflection
you still believe that it is I would be grateful if
you can explain what you believe its relevance to be
so that I can give further consideration to your request."
There is sometimes a fourth category of information,
namely information that the Officer has not requested
but that you think will help him to understand what
has happened and as such is likely to speed up the resolution
of his enquiry. You ought to have provided most such
information with the tax return in the hope of heading
off an enquiry, but sometimes the questions an Officer
raises demonstrate that he does not understand a transaction.
In such circumstances it is often better to explain
the transaction before dealing with his specific questions
so as to put your answers in context.
Do not be afraid of volunteering information when it
suits you to do so. In particular if an answer to a
question raises an obvious follow up question it is
often sensible to anticipate it and volunteer the answer.
Equally do not be afraid of challenging a request for
information that falls outside the scope of section
19A if you think it in the client's interests to do
so - and it is rarely in the client's interest to incur
the costs of allowing HMRC to mount a fishing expedition
into the client's affairs even if you are confident
that they will catch nothing.
Why should the Officer dictate the course of the enquiry?
Of course you should co-operate with the Officer in
bringing his enquiries to a speedy resolution. That
is in the best interests of the client. But "co-operation"
derives from the Latin "co" and "opera"
which roughly translate as together working. HMRC tell
us that they are committed to Working Together. So take
them at their word. Co-operation does not mean doing
as you are told by an Officer or giving him without
question anything that he chooses to ask for. It means
you and the Officer together seeking to resolve his
concerns. You know more about the client so ought to
be able to identify the most appropriate means to achieve
that objective more readily than the Officer. So why
pander to his less-informed whims?
In many cases the Officer will reject your proffered
help. That is sad but true. In such cases remember that
it takes two to co-operate. If the Officer is not willing
to work together with you why should you work together
with him? Faced with intransigence from HMRC it is surely
in the client's interests to think very carefully before
volunteering information to which the Officer is not
statutorily entitled.
See also:
SA
Enquiries 1 - Receipt on the Opening Letter
SA
Enquiries 3 - Records
SA Enquiries 4 - Meetings
SA Enquiries 5 - Section
19A & Para 27 Notices
SA Enquiries 6 - Going to
the General Commissioners
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© Blackstone Franks
Barbican House
26 -34 Old Street
London EC1V 9QR
January 2006
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