Certainly, HMRC has tried to address this previously with the Faster Working process. However, this failed to make the inroads into cases that HMRC was expecting.
After years of tinkering around with the enquiry process, HMRC has arrived at the Single Compliance Process (SCP), with five distinct stages and four levels of intensity depending on the seriousness of the perceived errors.
HMRC will trial this new process at 12 centres throughout the UK: Belfast; Newcastle; Cardiff; Reading; Slough; Edinburgh; Dundee; Southampton; Euston (London); Warrington; Exeter; and York.
On the face of it, this process appears to be more beneficial to taxpayers, on the basis that HMRC will only pursue the aspects identified as potential risks, rather than take a fishing trip into all of the client’s books and records. A faster enquiry process means less professional time dealing with the case and therefore less of an impact in terms of time and money (at least on professional fees) on the end client.
The proposal is to introduce a more inclusive process in which all of the identified risks are shared with the taxpayer and his professional advisors at the outset. This potentially gets rid of the HMRC tactic of keeping its concerns secret in the hope that the taxpayer will disclose other errors of which HMRC might be unaware.
While this aspect alone distinguishes SCP from the previous “faster working” process, the benefits for advisors of being able to target their efforts on a defined set of aspects is a welcome change.
Of course, this presupposes that the officer won’t query any other areas once he is engaged in the enquiry – understood to be one of the issues which undermined the Faster Working process.
Safeguards not so safe
The main problem is that HMRC will work within the existing legislative framework, which means that any safeguards will only be contained in guidance. By way of illustration, HMRC’s information powers (Sch 36 FA2008) allow officers access to up to six years’ statutory books and records.
There is no right of appeal against any formal information request that refers to those records. However, HMRC’s compliance handbook allows officers to make such requests only where they are in a discovery (S.29 TMA 1970) position (CH23540).
So the obvious question arises: what value does HMRC’s assurance have that officers will stay within set lines of enquiry when there is no legislation stipulating that they must do so?
The four levels of enquiry are:
1) Correspondence only with no need for on-site inspection or face-to-face meetings.
2) Simplified and faster route for which a lower intensity of face-to-face intervention might be required.
3) More technically involved cases in which a broader understanding of the business is required.
4) The most complex cases such as those involving aspects of evasion or where there are high levels of complexity.
Face to face
It is interesting to note HMRC’s assumption that clients will be willing to meet with officers, despite the fact that there remains no legislated obligation for clients to agree to do so. This being said, this new process does provide a ready-made agenda from which the officer should not be able to depart.
In that context, and in the interests of ending the enquiry early, it might be worth considering face-to-face meetings between a represented client and officers.
There will be five distinct stages for the SCP, most of which will be invisible to the taxpayer. These are:
1) Planning: initial risk review and consideration for cross-taxes treatment
2) Contact: formal enquiry notices and information requests issued
3) Process: review of information, dialogue with taxpayer or agent, on-site records reviews
4) Resolve: the purpose of this stage is to follow settlement procedures in order to bring the correct tax into charge.
5) Close: finalisation of paperwork and onward referral to any specialist risk teams if necessary (for instance national minimum wage, CIS review teams and so on)
HMRC mentions that it will not issue type-written notes of meetings unless they are asked to do so.
While the new process should be broadly welcomed, it should still be borne in mind that officers will not be constrained by the new process to turn a blind eye to anything they find out in the course of stages two and three of the process.
That acknowledged, it should still be a significant time-saver for clients, agents and HMRC that officers do not have to initially review large numbers of business records, generating several pages of queries when there is no perceived loss of revenue.