A new Taxpayers Charter was issued in January 2016 but it also included a requirement for better record-keeping.
Dealing with HMRC is rarely a pleasant task. An enquiry into a self-employed individual’s tax return and accounts can be a time consuming, stressful experience for the taxpayer (and sometimes their advisor) not to mention the cost of additional professional fees.
You do have protection!
Answering questions from and generally interacting with HMRC can be intimidating, especially so if you are subject to an investigation. Fortunately, HMRC has a Charter for taxpayers (‘Your Charter’). There is a legal requirement for the Charter to include standards of behaviour and values to which HMRC will aspire when dealing with people in the exercise of their functions.
‘Your Charter’ applies to the conduct of HMRC officers during an enquiry, although it is important to appreciate that it applies to HMRC’s interactions with taxpayers generally. The charter was amended in January 2016 and broadly comprises seven taxpayer rights:
- respect and treat you as honest
- provide helpful, efficient and effective service
- be professional and act with integrity
- protect your information and respect your privacy
- accept that someone else can represent you
- deal with complaints quickly and fairly
- tackle those who bend or break the rules
How can it help?
In the context of a tax return enquiry, the rights that taxpayers and agents should monitor in particular are the first and third ‘rights’ as shown above. The first in respect of the HMRC officer’s conduct from the outset of the enquiry and the third in terms of HMRC’s approach to the enquiry in general e.eg helping to keep fees to the client as low as possible.
HMRC state: ” we will presume that you are telling us the truth, unless we have good reason to think otherwise”. Taxpayers and agents might think that HMRC sometimes seem to take the opposite approach! Some cash based businesses have experienced HMRC attempting to discredit the accuracy and/or completeness of their accounting records (this practice is known as ‘breaking the records’) with a view to increasing taxable profits for the year of the enquiry. A respectful reminder to HMRC of the Charter standards required by them may sometimes be appropriate.
It works both ways?
Interestingly, the latest Charter also contains seven obligations on taxpayers. i.e what HMRC expects from taxpayers:
- be honest and respect our staff
- work with us t0 get things right
- find out what you need to do and keep us informed
- keep accurate records and protect your information
- know what your representative does on your behalf
- respond in good time
- take reasonable care to avoid mistakes
The taxpayer obligation to ‘keep accurate records’ is a change from the the previous Charter which stated that HMRC expected taxpayers to ‘keep adequate records that support what you tell us‘ This suggests a requirement for a higher standard of record-keeping.
Make sure that HMRC adheres to your rights under the Charter and remind them if necessary. A complaint against unacceptable behaviour by HMRC could also be considered in appropriate circumstances.
Also ensure that you meet your obligations to ensure that any enquiry and interactions with HMRC are concluded as smoothly and quickly as possible.