You’re subject to a tax investigation

But should you attend a meeting with HMRC?

When HMRC advise you that they’ve opened an investigation into your tax affairs, it’s unnerving, to say the least. It’s also not uncommon in the early days of your investigation for HMRC to invite you to attend a meeting with them. Which begs two questions: are you obliged to attend and if not, should you go?

Are you legally obliged to attend a meeting with HMRC?

The answer to this in most cases, is no, you are not obliged to attend. There are two exceptions to this, namely:

• If you are the subject of a COP 9 investigation. A COP 9 investigation is a civil procedure used in cases where serious tax fraud is suspected. If you are subject to this type of investigation, whilst you must attend, it is essential that you do so in the company of a specialist advisor to ensure you only answer questions and provide the information that you are legally required to provide.

• If you are under investigation pursuant to section 144 of the Finance Act 2000 which relates to the criminal offence of fraudulent evasion of income tax. In this situation, the interview will be conducted under the Police and Criminal Evidence Act 1984 and again, it’s essential you have proper representation and do not attend alone.

Should you attend an open meeting with HMRC?

HMRC will often invite you to attend a meeting shortly after they’ve examined your business records or opened an investigation. Provided you don’t fall within one of the two exceptions above, the answer to whether you should attend this meeting is usually no, although each investigation should always be considered on its individual merits and facts.

The nature of a meeting with HMRC

The purpose of this meeting is ostensibly to gain a better understanding of your business operations and identify any errors or weaknesses in your record keeping and tax affairs. The investigation may be simply a random enquiry, or what some might call a fishing expedition.

Or the investigation may be as a result of information HMRC possess that has led them to believe there is something wrong with your tax affairs.

These early investigative meetings are often challenging and intimidating. The HMRC officer may undoubtedly have their own understanding and interpretation of your tax position and affairs. This does not necessarily mean they are correct. What’s more, it is unlikely that you are familiar with the exact extent of HMRC’s investigative powers. It is not unheard of for an inspector to demand information and disclosure than they are not legally entitled to.

HMRC officers can also be provocative, aggravating and challenging. They may cast aspersions on your integrity. In a situation where you are already likely to feel very anxious and be keen to be seen to be doing the right thing, it is easy to be pressured into admitting to HMRC’s interpretation of your affairs (regardless of whether it is actually accurate). It can also be very difficult when put on the spot to recall details of your affairs accurately.

You may also find yourself persuaded to attend the meeting either at HMRC offices or at your own, business premises, neither of which you’re obliged to do. The additional emotional impact of these venues should not be underestimated.

The result can often be that the issues become muddy and unclear, which in turns results in a protracted investigation which can be costly, time consuming, extremely stressful and very possibly, unnecessary.

What’s the alternative?

The alternative is to instruct a tax investigation specialist. They will contact HMRC on your behalf in order to clarify the issues, and if possible, to define and or limit the scope and parameters of the investigation. HMRC may request disclosure of large quantities of documents. Your advisor is there to ensure that you only have to provide that which is reasonable and necessary to deal with the specific issues in hand.

Your advisor may be able to challenge HMRC’s interpretation of your tax affairs and situation – which in turns means they may well be able to explain complex financial issues which have been misunderstood and thereby satisfy HMRC that in fact, your affairs are all in good order. And your advisor will eliminate the risk of any knee jerk reactions or disclosures by you that are based on memory (rather than an accurate recollection of the minutiae of your affairs).

Settlement meetings

There may be meetings held later on during the course of an investigation with a view to exploring or reaching a settlement. Once again, you are not obliged to attend. More often than not, in the early stages of any negotiations, it is better to instruct your tax specialist to attend on your behalf. If it is necessary to attend in order to negotiate and agree terms, it is absolutely crucial that you attend with your advisor.

Giving yourself a fighting chance

If you are the subject of a tax investigation, it is important to seek advice as early as possible. An experienced tax investigation specialist can save you valuable time and money, and in may cases, may be able to bring the investigation to a swift and satisfactory close.