HMRC issue enquiries to taxpayers every day
Most of these are based upon something that may seem incorrect, or is contradictory to something they know from another source. A very small percentage is speculative enquiries, which are generally easily satisfied. Most enquiries are dealt with in writing, and either the taxpayer is able to satisfy HMRC of the correctness of their return, or the error is identified, and an amendment made. Where the error has caused an underpayment of tax, there is always a fine to be paid, on top of the tax shortfall, as a percentage of that shortfall. There are guidance rules about how the fine is calculated.
What could happen?
Most enquiries are resolved, one way or the other, by reviewing the returns contents, which may require amendment to the return, and writing one or two letters.
Some enquiries rattle on for several weeks, with multiple exchanges of letters.
The worst case scenario is that the enquiry is converted to an investigation, (enquiry protection does not cover this) which then can take years to resolve, but happily this is rare, and we have never had an enquiry converted to an investigation. This usually happens when the taxpayer is known to have lied and continues with that approach, or HMRC have good reason to believe the taxpayer is lying.
Whichever position the taxpayer finds himself in, the cost of paying for the expertise to deal with even a simple enquiry can spiral to very large figures!
A cost effective solution
We ask our clients to pay a small additional monthly sum to cover our time dealing with these enquiries, should they arise. This then covers our time in dealing with the enquiry throughout its life, to the point of closure of the enquiry, and whilst we cannot guarantee the result will be in favour of the taxpayer, we can guarantee no additional costs for our time in dealing with the matter. You may opt out of this fee, but you then put yourself in the position of having to pay for our time, which can cost more than your actual annual fee!
For more information see our terms and conditions of service.