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Our subscriber received a routine HMRC compliance questionnaire which he completed in full. HMRC then demanded more detailed information but without starting an investigation. Is our subscriber within his rights to refuse to supply it?

Enquiries and checks

Before looking at our subscriber’s situation we need to outline HMRC’s rules for compliance checks and enquiries. Between 2008 and 2010 the rules were completely overhauled and are now generally fairer for law abiding taxpayers. Under the current regime HMRC isn’t entitled to ask ad hoc questions to drum up grounds to begin a formal enquiry. However, it is allowed to start a small number of formal enquiries at random and in all cases where there appears to be an error in a tax return. These rules apply to all types of tax return.

Correcting simple errors

HMRC is only permitted to ask in-depth questions if it has formally started a tax enquiry. When this happens it must send a letter to you stating the legislation that authorises the enquiry.

Tip. If you don’t receive such a letter, HMRC isn’t entitled to ask in-depth questions about your tax returns.

Compliance checks

In addition to tax enquiries, HMRC can make routine reviews, known as compliance checks, of a business’s records, often those for PAYE/NI and construction industry scheme (CIS) payments. It does this by issuing a questionnaire about your systems and procedures for ensuring compliance. Only if this throws up discrepancies with figures you have reported on your returns can HMRC start an enquiry and ask in-depth questions.

Tip. Don’t stint when answering a compliance questionnaire. Full and clear answers will mean there’s less chance of HMRC starting an enquiry.

More questions but no enquiry

After our subscriber answered the compliance questionnaire in full, HMRC responded with a request for bank statements so it could compare CIS payments with the reports submitted. At this stage HMRC had no right to ask for bank statements. If it had serious issues with our subscriber’s CIS returns it should have started an enquiry.

Tip. Even in an enquiry HMRC doesn’t have an automatic right to see bank statements. It can only insist on them if it sent you a formal information request. It can only issue one of these if the documents it asks for are “reasonably” required to check the accuracy of your tax return.

To send or not to send? Our subscriber is in a strong position to refuse HMRC’s request as so far as there is no suggestion of any discrepancy in the returns and he has been provided with all the information HMRC needs to confirm the figures on his CIS reports. While he has nothing to hide, HMRC officers often can’t help themselves from picking through bank statements and asking questions about irrelevant transactions. Unless there’s an ongoing enquiry they shouldn’t do this. It would cost our subscriber time and money (accountants’/bookkeepers’ fees) to answer HMRC’s unnecessary queries. However, refusing to provide the bank statement is likely to escalate the matter which would cost even more time and money.

Tip. In this instance as the bank statements requested only cover two months we’ve recommended that our subscriber send them but before doing so he should annotate all transactions where the purpose is not clear from the narrative. This will take time but probably far less than having to respond to vague HMRC questions or an enquiry.

HMRC doesn’t have a right to bank statements unless it issues a formal “information request”. It can only do that if they are reasonably required to check a tax return. Our subscriber can therefore refuse HMRC’s request, but to forestall further questions he could provide the statements with notes briefly describing the purpose of the transactions where necessary.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.

18th Jan 2024 12:50


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