10 top tips on how to face up to HMRC
No-one, not a single person, thinks being investigated by the Taxman (or Taxwoman) is likely to be a pleasant experience. Whilst not pleasant, a few simple ground rules and a common sense approach can put such an intrusion on a good footing though and, hopefully, make it easier, less painful with lower stress levels.
Although every investigation is different – we're dealing with people after all not robots – here are our 10 top tips on how to face up to HMRC:
1. Calm down and don't panic
Every taxpayer faces the chance of going through a "compliance check" aka an investigation. The Taxman should view it as a process and you should too.
Very few cases are prosecuted and the vast majority end up with no worse than a cheque being written. Indeed, a large proportion end up with nothing being wrong at all.
2. Be discrete about it
Keep it tight – you, your advisor and maybe close family. Please not the "man down the pub" whose advice will be way off the mark – it always is.
When it's finished, don't make a big song and dance about it – telling the same "man down the pub" how you got away with it in a show of bravado, will inevitably get back to the Taxman, whether you did or didn't - there are too many wagging ears out there and it's easy to pop a mischievous call in to the Revenue. As someone who has taken a number of those calls over the years, let me tell you they happen with surprising regularity.
3. Always, always tell the truth
No fibs, no half-truths, no guesses – if you don't know say you don't know. Do not, ever, ever, ever lie to the Taxman. You don't know what he knows already and what traps he's setting for you to fall into.
4. The taxman sees all!
So ok, that's an exaggeration, but the Taxman has a vast array of IT and people based resource available to search through millions of pieces of data to find out about you or your business. You'd be amazed what they know about you already when they start their investigation.
5. Know your rights
It’s all in the HMRC factsheets and their website, there’s no excuse really. For example, the Taxman cannot insist on you meeting him, but he won’t tell you that. If you’ve got an advisor, let them do the hard work for you, that’s what you pay them for.
6. Money talks
If you've done something wrong, or the Taxman convinces you there's a mistake, pay early. You cannot show better cooperation, and it will reduce any penalties. Plus it stops interest running on all or part of the tax due. And, on top of that, you're making life easier for the Taxman, so should get a lighter touch approach. Only pay though when you're sure there's a problem.
7. Keep your paperwork handy
Believe it or not, it will be a big help to you and your advisor. Don't suffer a "flood", a "fire" or a "burglary" where the records disappear, and we've experienced all of these, as the Taxman is allowed fill those holes in information with his numbers. If HMRC want to go back the full 20 years, then disproving the Taxman's numbers without any papers is very difficult and costly.
8. See it like a project
Being aggressive or uncooperative will not make the Taxman go away – he's experienced that too many times and he has all the powers. Rather see it like a process to get through, one step at a time, and trust the guidance of your advisor as he too will have seen these things many many times. Don't be complacent too, but just keep it in perspective.
9. Mend your ways
If you've done something wrong, there is a high chance HMRC will come back and check that you've learnt your lesson, so make sure you have. If you continue to make mistakes, expect HMRC to take a very dim view of them.
10. Get good advice
Even HMRC will prefer that you've got good advice. If you're facing an investigation don't go it alone. An advisor is on your side and will have experience of all the do's and don'ts.
Please click the link below to download a PDF version of the Top Ten Tips Guide.