When an inspector calls
During the year the Inspector of Taxes will carry
out many enquiries on individuals and companies.
In broad terms, these inspections aim to detect fraud
and tax evasion as well as help to promote compliance
with tax laws and regulations.
Selection for an enquiry
Some taxpayers are chosen at random. These enquiries
generally look at one particular aspect and are therefore
often known as 'aspect enquiries'.
For instance, the enquiry might check that the taxpayer's
bank interest has been declared. If the process confirms
this aspect of the tax return is accurate, the enquiry
will end.
More serious enquiries will often begin with a suspicion
that the taxpayer has failed to fully declare their
income and falsified their expenses.
Starting an enquiry
The taxpayer will be informed, in writing, that they
are to be investigated. This notification will state
the reasons why the inspector is taking this action
and the information that he or she will need.
Conduct
of the enquiry
The precise structure of each investigation will depend
on the nature of the enquiries. Usually, the taxpayer
will have to submit all their accounting records to
the inspector.
After these have been studied, the inspector will
interview the taxpayer. This interview will give the
inspector the opportunity to explain the findings of
the review.
The interview also gives the taxpayer the opportunity
to explain the transactions and answer any questions
raised by the inspector.
Concluding the enquiry
The investigation process can be quite lengthy, often
running for several months. As well as the interview,
it can involve lengthy correspondence.
Eventually, both parties will agree on the amount
of underpaid tax, if any.
If some tax has not been paid, the inspector will
also apply penalties for the failure. These penalties
can be up to 100% of the underpaid tax.
The inspector can decide whether to reduce this to
reflect such matters as the taxpayer's co-operation,
the size and seriousness of the offence and the amount
of voluntary disclosure made by the taxpayer.
A tax enquiry is a very serious matter and if you
are being investigated you should get advice from Appletons
Accountants who can guide you through the process.
