How to prepare your clients for HMRC questions

HMRC believe that such questions are successful in getting to the bottom of matters whenever a taxpayer’s past tax comes into question.

HMRC will ask open questions in order to avoid simple yes or no answers. That said, where it is important to consolidate an understanding or there is a need to avoid any ambiguity or confusion going forwards, the style of questions can change accordingly.

Preparation required in advance of meeting HMRC

It is important that a taxpayer is quizzed by a tax specialist in such areas prior to any meeting with HMRC. A tax specialist will be able to guide a taxpayer on how to answer a question and when not to, and should ideally be present in any meeting with HMRC.

For example, it may be that HMRC asks a misleading question that should not be answered. In such a case, the question itself should be challenged before the taxpayer answers it.

In other instances, the question may be perfectly clear, but the answer given by the taxpayer is not, or the taxpayer answers a different question to the one that was actually asked.

The ground rules

Logic and HMRC do not always fit well together. Consequently, several ground rules need to be borne in mind, such as:

• The question must be relevant to the matter(s) being discussed and the outcome/answer must also have a potential or actual UK tax consequence.
• The question may be unfair. There is a limit as to how far back an individual can remember accurately. Memories may need to be refreshed or the answer may need to be researched. In which case either no answer should be offered, or it should be given with an appropriate caveat that more research is needed.
• The question may be asked of the wrong person.
• The question may be asking for an opinion and not a fact.

HMRC will note both the question and each answer. Rarely are the questions put in writing before being asked. Care needs to be taken in reviewing the record of both the question and the answer.

Who is in control of asking the questions?

Normally this will be HMRC. The role of the adviser will be to listen and intervene only by exception.

Who should be in control of asking the questions?

HMRC may have an agenda which may or may not be circulated in advance of any meeting. Whilst HMRC will want to have answers to all their questions, the adviser should control when and how the questions are asked.

Who should be in control of the answers?

The questions themselves should do no real harm – but the answers might! This is why it is imperative that a specialist adviser is there to support the taxpayer.

Notes of Meeting

HMRC will normally insist on taking their own Notes of Meeting. It is best practice for HMRC to issue the Notes of Meeting to all attendees for everyone’s agreement.

No tape recordings are taken, and the notes will be typed up from the contemporaneous manuscript notes taken.

As they form a permanent record on the taxpayer’s file, it is vital that these are checked, and any proposed amendments put in writing back to HMRC.

It is advisable to agree with HMRC prior to the meeting that each paragraph in the Notes of Meeting will be consecutively numbered for ease of reference.

Final thoughts

If an answer is given that is clear and answers the question, HMRC will take the answer to be a statement of fact. So, if an answer needs to be researched further, this should be stated at the time. For example, if the answer is that “the taxpayer drives to work,” it could be assumed that the taxpayer never walks to work or travels as a passenger or by another mode of transport.

Whereas if the answer was “the taxpayer regularly drives to work because of the lack of public transport except when a colleague offers a lift” may be a more accurate response. This may be an extreme example, but it is offered by way of an illustration.

If you or any of your clients are facing HMRC in a meeting, you can contact Paul Malin for advice and support prior to, during or after a meeting, at [email protected] or call 07979 313 010.