January 16. 2017
The first line of the letter that tends to send a
shiver down the spine of most self-employed individuals if they are unlucky enough
to receive a letter from HM Revenue & Customs.
You may have submitted your Tax Return and thought ‘great,
it has been accepted’. But confirmation of receipt doesn’t mean to say that
HMRC have finished with it.
Under Self-Assessment, the Revenue’s method of dealing with
Tax Returns is to “Process Now / Check Later.” The Revenue then has a
period of time to review the entries on the Return. If some of the
entries on the Return differ from information which they already hold or if
these entries fall outside the normally accepted patterns for that particular
business sector, then there is a possibility that the Return could be selected
for an enquiry.
There is a time limit within which the Revenue can take up
an enquiry. This is currently within 12 months of the normal filing date
for the Return i.e. a 2015/16 Tax Return must be filed with the Revenue by 31st
January 2017, therefore the window for opening an enquiry is up to 31st January
2018.
However, it has been known for HMRC to open an enquiry
outside of that time frame which is called a ‘Discovery’ enquiry. Why can
they do this you ask? Because they can! Such an enquiry can take
place where based on the information (or lack of) shown on the tax return HMRC
could not have known that the tax return was incorrect and issued an enquiry
within the normal time limits.
In addition to the ‘normal’ lines of enquiry, HMRC are now
carrying out random ‘Business Record’ checks in which
they look into your record keeping. If they have reason to believe that
it is not up to scratch, they will arrange to make a visit.
Unfortunately, no one is immune from receiving a ‘Business
Record’ check, however you can take steps to avoid a full-blown
investigation. How? Stay tuned for our next tip – Keeping the Tax
man at bay!