Revenue Admit not all Tax Returns are Read before Expensive Enquiries Launched

It may come as a surprise that the Inland Revenue do not necessarily read the file before launching an investigation into a person’s tax affairs. But after seven years of self-assessment, the department has finally agreed that it should do so.

It means that tax offices should no longer ignore explanatory notes entered in the “white space boxes” on self-assessment forms before opening an Enquiry.

It should mean self-employed and higher tax ratepayers who disclose additional information in the spaces provided on returns to clarify changes in their circumstances should no longer be wasting their time.

Since self-assessment was introduced in 1996, it has been common practice for tax inspectors to launch full investigations without consulting these notes because those were kept in a separate location. The problem occurs when the information on self-assessment forms is put on to the Inland Revenue’s computer system. The software did not accept the supporting notes, written in the boxes actually provided on the form.

The Inland Revenue accepted that many tax inspectors ignored the references and launched needless enquiries, which took up to 18 months to resolve.

There is still concern that tax inspectors would still ignore the explanatory notes when deciding whether to query aspects of a tax return. Over 62,000 such enquiries were made by the 1,300 tax inspectors last year.

Nunn Hayward operate a “fee protection scheme” precisely to cover professional fees that would be incurred by our clients in defending themselves from such issues.

If you have any queries regarding this article please contact your usual Nunn Hayward contact or call Steve Cook, Tax Partner.