I’m catching up on reading and saw Richard Murphy’s advice to practitioners on managing investigations following an appalling tale of woe as recounted by Simon Sweetman. While I agree with all the points both Richard and Simon raise along with many of the comments to Simon’s post, I’ve some of my own to add:
- Don’t let your clients get investigated in the first place. I realise this is nigh on impossible but applying sensitivity analysis techniques to the numbers when the accounts are prepared helps. As does the creation of a library of results for similar businesses so you can assess how your client is doing in relation to similar businesses. This has the additional benefit of allowing you to not only sanity check results but also provides firepower when HMRC makes claims like ‘not in line with other businesses in the area.’
- Look for clues in the enquiry letter, clarify what is in the Inspector’s mind and ensure your client understands where the Inspector’s suspicions lay. This should be a single process because what you’re trying to do is align your understanding to both that of the Inspector and the client.
- Endeavour to quantify the areas of enquiry as early as possible to ensure you can calculate the likely timeframe over which the investigation will last. This will help determine fees and and the extent to which you feel comfortable handling questions.
- From the outset, carefully explain to the client what is happening, outlining the penalty provisions with examples of what this could mean financially and the likely time period over which the investigation will take place.
- Advise clients that investigation fees often run 2 or 3 times that of the annual fee but can go much higher. This usually gets their attention and helps elicit early disclosure of anything they need to make known.
- Make detailed notes of all client interviews and telephone conversations. These will be important should the inevitable ‘You never asked me about that’ issue arises.
- Concede the obvious and negotiate the easy things early on. A few points on personal usage elements will make the Inspector feel as though they’ve got something and often at little cost to the client.
- Record all Inspector interviews making clear in advance that is your intention and that you will have a transcript prepared following the meeting. This is a powerful tool to ensure the Inspector neither intimidates your client or attempts fishing questions. It also ensures there is no doubt about the content of the meeting.
- Make sure that if your client doesn’t know the answer to an Inspector’s question that you intervene and make clear that you don’t know the answer and will return to the Inspector with a full response.
- Always keep the client fully apprised of progress. A client who is kept in the dark will resent surprises later on. A client who has been informed will be more inclined to co-operate.
- Don’t let the case go to the GC unless you really have to and feel confident of your ground, backed up by witnesses. Absolutely never let your client dictate that course because it will almost certainly end in tears. I’ve represented clients at GC and won. But only because I knew I was on solid ground.
- If at any time you get a whiff that your client has done something that would be considered evasion, get a second opinion. And then if that’s confirmed, drop them. Fast. You cannot have your reputation tarnished by association with tax evaders. It will bring more clients under suspicion – often un-necessarily.
- Above all, if you don’t feel competent to handle the enquiry for any reason – call for help at the earliest opportunity. There is no shame in admitting you’re not qualified to handle a particular problem. That’s why we have experts. Your client will thank you for it later.
Technorati Tags: tax evasion – tax investigation
