SALF405 - Enquiries into Tax Returns: Enquiry Procedures

Amendment of return by taxpayer during enquiry

Section 9B

4.30	An officer can extend his or her existing enquiry into a tax return to include any amendment made by the taxpayer during the enquiry (S9B(2)). Normally the officer will enquire into the tax return, as it was when the enquiry was opened, and into any amendments made during the enquiry.

Power to call for information for purposes of enquiries

Section 19A(1) & (2)

4.31	The procedures only apply where an officer of the Board has issued a formal notice of enquiry in respect of any tax return, or an amendment to a return.
4.32	The general information powers of TMA70/S20 (which apply to both taxpayers and third parties) apply where appropriate. Although there are some apparent similarities between Section 19A and TMA70/S20 they fulfil two distinct and separate functions.
4.33	Section 19A provides part of the formal framework for the ‘check later’ component of ‘process now - check later’. As such it only applies where an officer of the Board is seeking to establish the accuracy of a particular tax return. The information that can be sought is limited to that which is reasonably required to determining whether or not the tax return is correct and complete and quantifying the extent to which it is incorrect or incomplete.
4.34	By contrast TMA70/S20 is a general investigative power, which can be used in a wide variety of circumstances. It allows the officer to seek information relating to any tax liability to which the taxpayer may be subject. It is not restricted to a particular tax return, or to a particular period, and it can be used to obtain information from third parties.

Formal notice may be given requesting documents, accounts or particulars

Section 19A(2)

4.35	The officer of the Board making the enquiry may also issue a notice requiring the production of documents, accounts or other written particulars. This notice may be issued at the same time as the notice of enquiry, or at some later date.

The taxpayer is given at least 30 days to comply with the request

4.36	Whenever a formal notice is issued that notice must specify a time limit for compliance with the notice. This time limit must be not less than 30 days from delivery of the notice.
4.37	If taxpayers require a longer period to provide the information requested they should contact the officer to explain the problem. In genuine cases the officer will agree a revised time scale.
4.38	Where, exceptionally, the taxpayer cannot obtain the information, or it does not exist, the taxpayer should explain the circumstances to the officer dealing with the enquiry.

Limits on the information and documents that may be requested

Section 19A(2)(a)

4.39

The officer may only require documents that are in the taxpayer's possession or power. And those documents must be documents which, in the officer's reasonable opinion, are required to determine whether or not and the extent to which

a particular tax return is incorrect or incomplete, or
an amendment is incorrect (in the case of an enquiry limited to matters related to or affected by an amendment).

Section 19A(2)(b)

4.40	In addition to any documents the officer may require any ‘accounts or particulars’ which are reasonably required to determine the accuracy or completeness of any tax return.
4.41	The word ‘particulars’ is used in the ordinary sense of ‘detailed account’. So, for example, the taxpayer may be asked to give a detailed factual account of how an entry in a tax return is made up.
4.42	The rules in Section 19A only apply to written requests for written information. The officer has no power to require someone to attend an interview, but of course a meeting will often be a more effective way of resolving an enquiry.

Section 19A(5)

4.43	The taxpayer does not have to supply any documents, accounts or particulars relating to the conduct of any pending appeal.

Nature and amount of information that may be requested

4.44	Clearly the nature and quantity of documents, accounts and particulars that are required in any case will depend on the nature of the enquiry. However, in all cases the request must be limited to documents, accounts and particulars connected with the tax return.
4.45	For example, for a simple technical enquiry into expenditure qualifying for capital allowances the request would be limited to the documents, accounts and particulars detailing that expenditure. But for a full in-depth review of a business the request would cover all the records of that business.
4.46	Information such as details of a taxpayer's personal expenditure, personal assets or non-taxable income may be required during an enquiry under Section 19A if the information can be shown to be reasonably relevant to the tax return. If S19A is not appropriate, but the information is needed, any such information can be sought informally, and if not provided informally, it can be sought formally under TMA70/S20.

Compliance with request for documents or information

Section 19A(3)

4.47	The taxpayer may provide copies of documents instead of the originals, but the officer has the right to give formal notice that the original documents are required for inspection.

Section 19A(4)

4.48	The officer also has the right to take copies of, or make extracts from, any document produced.

Appeals against requests for documents, accounts or particulars

Section 19A(6) to (11)

4.49	The taxpayer may appeal against the formal notice requiring documents, accounts or particulars. Any appeal must be made within 30 days of the date on which the notice requesting the documents is given (delivered).
4.50	The appeal is against any requirement imposed by a S19A notice. HMRC generally interpret this to include consideration of whether the information requested is reasonably required to determine whether or not a return is complete and correct, and whether the taxpayer has been given sufficient time to comply with the notice. The appeal cannot be used to challenge HMRC's right to make enquiries into any tax return. However, it has been accepted as a matter of practice that ‘any requirement imposed’ should be interpreted widely to allow the taxpayer a right to a hearing in cases
4.51	The normal appeal procedures apply.
4.52	When determining the appeal the Commissioners will either confirm the original notice, or confirm only that part of the notice which they consider to be reasonably required to determine the accuracy and completeness of any tax return or amendment, or set the notice aside.
4.53	Whenever a notice is confirmed that notice must be complied with within 30 days of the determination of the appeal.
4.54	Neither party will be entitled to require a stated case. This is because it is a question of fact whether or not the information requested is reasonably relevant to determine the accuracy of the tax return.

Failure to comply with a notice requesting documents accounts or particulars

Section 97AA

4.55

Failure to comply with a S19A notice may result in the determination of a penalty.

4.56

Where HMRC receive information, or encounter a lack of co-operation, that leads them to suspect that documents requested as supporting evidence (for example, for a claim to relief) do not exist, they may proceed directly to issuing a closure notice. This allows HMRC to address the issues raised by the enquiry in the closure notice whilst avoiding penalising the taxpayer for failing to provide something that doesn’t exist (see para 4.62).

Section 97AA(1)

4.57	The initial penalty is £50, but if the failure continues after the determination of the penalty additional daily penalties may be imposed.

Section 97AA(2) & (3)

4.58	If the additional daily penalty is determined by an authorised officer of the Board (Section 100) the maximum penalty that can be imposed is £30 per day. If the penalty is determined by the Commissioners in formal penalty proceedings (Section 100C) the maximum is £150 per day.
4.59	The taxpayer can appeal against the penalty in the normal way (Section 100B).

Section 97AA(4)

4.60	No penalty can be determined after the failure has been corrected.
4.61	There can be no question of a penalty in any case in which it is genuinely impossible, for whatever reason, to comply with the notice.
4.62	A taxpayer cannot be penalised for failing to produce records that do not exist. So whenever the taxpayer has failed to keep the records required by Section 12B a penalty may arise for that failure, but not for any consequential failure under Section 19A.
4.63	However, where, exceptionally, the taxpayer has kept some records, but fails to comply with a request to produce them, penalties could be sought for both the failure under Section 12B and the failure under Section 19A.

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