H M REVENUE & CUSTOMS: CODE OF PRACTICE 9 (2005)
This Code of Practice applies only to investigations that started after 1 September 2005.
HMRC will investigate any situation where it is suspected there is serious tax fraud.
Whilst the opportunity is given to the tax payer to fully co-operative and disclosure any irregularities in their tax affairs the investigation will be undertaken with or without their voluntary co-operation.
The Code of Practice covers Income Tax, Corporation Tax, Capital Gains Tax, National Insurance and VAT. The Code of Practice promises fair treatment under the law and the starting of the investigation process which can go back over a period of 20 years.
HMRC will request a meeting where the tax payer will be asked questions about any irregularities in his tax affairs which will be 5 in nature as regards direct taxation and 4 in nature as regards indirect taxation. Questions can only be answered either Yes or No.
Whilst the tax payer is not required to attend a meeting as regards co-operation this will not be held favourably when settlement terms are being negotiated.
A Disclosure Report will have to be prepared keeping to a specific timetable agreed between the Professional Advisor and HMRC.
This Report will contain the following:
(a) A brief business history.
(b) The nature of irregularities and how they came about.
(c) The extent of the irregularities.
(d) Steps taken to verify the irregularities with supporting documents and any assumptions made.
(e) A detailed Schedule of irregularities for each period involved for each tax.
If the Report is prepared in a timely basis whilst the penalties can be 100% of the tax then HMRC will look favourably in reducing same.
The Banding of Penalties are as follows:
(a) 20% for complete Disclosure.
(b) 40% for co-operation.
(c) 40% in relation to the seriousness of the Case.
In the first instance, please contact Brian Sochall or Nilufer Hoare for a free Consultation.