CH285480 - How to do a compliance check: finishing a compliance check: what if something is wrong: poor co-operation
You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.
If you have already assessed the tax/duty after following the relevant guidance about the timing of the tax/duty assessment, you must follow the guidance at CH285470, rather than the guidance on this page.
When the person has not co-operated with the check, or co-operation has been withdrawn, telling the person that you intend to issue formal tax/duty and penalty assessments is intended to encourage them to begin or resume discussions which will hopefully lead to an agreement. Where this is not successful, you will have no alternative but to proceed formally.
If you are considering formal action, you must take the following steps:
- Check that you can demonstrate that
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- you have considered the Litigation and Settlement Strategy
- you have made a serious and sustained attempt to reach an agreed position with the person
- you have maximised the use of information powers and penalties
- you have met, tried to meet, or telephoned the person to explain the position, ideally in face to face checks where it is appropriate to do so
- you have established the lost revenue as accurately as possible
- you have already considered the underlying behaviours and the level of any potential penalty and your manager has approved this, where appropriate, see CH407050, and
- your manager agrees that you have maximised the use of information powers and approves formal action.
- your manager has authorised the penalty.
- Issue a warning letter, see below, explaining our view of the tax/duty position and saying that, if we do not hear from the person within 30 days, we intend to issue tax/duty assessments. The letter must explain that we are also considering penalties with the intention of issuing both tax/duty and penalty decisions together after the 30 days has elapsed.
Issue a ’warning letter’ for direct tax, see EM5207b, or a ’warning letter’ for indirect tax, see ARTG3020.
- Allow the person at least 10 days to reply before you seek authorisation to issue a penalty assessment. Although we are allowing the person 30 days to respond, you will have to start work on your penalties submission sooner. You should aim to be in a position where you can, if required, issue the tax/duty and penalty decisions at approximately the same time, but where possible not later than 45 days from the date you issue the warning letter. If you suspect evasion in a case you should immediately refer it to the Evasion Referral Team, regardless of the amount of suspected evaded tax or duties. (This text has been withheld because of exemptions in the Freedom of Information Act 2000) (This text has been withheld because of exemptions in the Freedom of Information Act 2000)
- If constructive discussions resume within 30 days, and potentially up to 45 days, from the date of the warning/pre-decision letter, you should continue with your check with the aim of reaching an agreed position with the person. If you cannot make any significant progress towards reaching an agreed position and the penalty has been authorised by the authorising officer, you should issue an explanation letter, see ARTG2190 (direct taxes) or ARTG3050 (indirect taxes) and ARTG15000, after at least 30 days have elapsed from the date of the warning/pre-decision letter, referring to our view of the tax/duty position in the warning/pre-decision letter and explaining our penalty position.
- You must process the formal tax/duty and penalty assessments at the same time, but in any event no later than 5 days after the person is sent the explanation letter. Only allow the additional 5 days if you have reason to believe that your explanation of the penalty position will prompt the person to resume meaningful settlement discussions. As the tax/duty and penalty assessments are issued by different HMRC systems and the notices may not be issued by these on the same day, you must process them on the same day to minimise the time between the dates they are received.
For a graphical version of these steps and timeline, see CH285490.
See CH285460 if
- either the tax/duty and penalties have been agreed but it is not possible to enter into a contract settlement
- or the person has co-operated with the check but agreement still cannot be reached.
