Timing of a Meeting
Enquires are instigated for very many reasons including random selection, risk based assessments, industry and local comparatives, information received etc. Nevertheless before enquiry notices are issued under Section 9A Taxes Management Act 1970, Section 12AC Taxes Management Act 1970 or paragraph 24 Schedule 18 Finance Act 1998, a full review is carried out of tax district files, history and other information. An Inspector will identify the information which is necessary to check the income tax or corporation tax return and will then issue an opening letter with a formal enquiry notice (accompanied by the appropriate code of practice) and a separate letter to the accountant usually requesting the information deemed necessary. Having obtained the information which in the case of a full enquiry will usually, for small and medium size businesses, include a request to see books and records, the Inspector will then embark on a case review including examination of the business records provided.
Only following examination of the information requested, if the Inspector has any lingering (and dare we say "tangible") concerns, should he ask to see a client.
A meeting should therefore not be seen as the automatic and unavoidable fifth or sixth stage of an enquiry. Meetings should certainly not be requested in every single enquiry case. Most accountants (and even a few Inspectors) would agree that there are a percentage of individuals and companies whose affairs are completely above board and whose record keeping is meticulous. In such cases where the Inspector is unable to demonstrate a sufficiently good reason for wishing to see a client, meetings should politely be declined. However, if an Inspector does have genuine concerns with which the practitioner is satisfied and which are not capable of being answered by him, it may well be appropriate to advise your client to meet with the Inland Revenue.
When Not To Attend A Meeting
In some circumstances, it would be wholly inappropriate to advise your client to attend a meeting with the Inland Revenue. For instance, any client who has a medical condition linked to stress, blood pressure or heart condition should not be allowed to see the Inland Revenue. We have yet to come across an Inspector who insists on a meeting, having been advised of a serious health condition and provided with a supporting medical certificate.
Next, there are those clients who by their hostile attitude or those with an innate ability to confuse the unconfusable, would not do themselves or the Inland Revenue a service by attending a meeting. Such clients will often flatter to deceive but only succeed in spinning a web of misunderstandings which the practitioner is left to untangle later.
Finally, clients who provide evidence of fraud whether it relates to false accounts, false returns, false invoices, false claims or other heinous categories of behaviour, should not be allowed to meet with the Inland Revenue until the practitioner has fully explored the extent of any disclosure needing to be made both in terms of the quantum of any additional profits/income and the number of years involved. It will also be appropriate in the larger or the most heinous cases to take advice from an appropriate specialist who will be able to negotiate the protection of 'Hansard' in advance of any meeting with officers of the Special Compliance Office.
Venue
Where a practitioner takes the view that a meeting is justified and will prove useful to expediting an early settlement, the next decision that needs to be taken is where to hold the meeting. This decision will be influenced by a number of factors not least where the Inland Revenue request to have the meeting. Broadly, however, the venue will be at one of four places:-
- The accountant's office
- The Inland Revenue tax office
- The business premises
- The taxpayer's home
In our experience most meetings will take place at the first two venues. Inspectors generally have no objection to meeting at the accountant's offices and are mindful to keep professional costs to a minimum in accordance with what used to be known as the Taxpayers' Charter. However, negotiation may be necessary where there is some distance between the location of the accountant's office and the Inland Revenue tax office. It is usually advisable to hold any initial meeting at the accountant's office, with the practitioner agreeing to hold any follow up meeting at the tax office. Advisers should not be bullied into attending meetings at the Revenue's office purely because the Inspector does not wish to put himself out and travel.
Holding the first and probably the most important meeting at the accountant's offices will relieve the client of some of the stress associated with the trauma of an Inland Revenue interview. At least he will be familiar with and comfortable at the practitioner's offices. The client should be advised to turn up 15 minutes or so before the Inspector(s) arrives and compose himself suitably.
Meetings at business premises are being requested more frequently although such requests may need to be declined on the following reasonable grounds:
- potential disruption to business
- reasons of confidentiality
- lack of a suitable room
We have experienced a number of situations in recent years where it has actually been advantageous to take Inland Revenue officers to business premises in order to allay specific concerns, although this should only happen when ground rules have been agreed in advance. Such rules include asking Inspectors not to engage in conversations with receptionists or 'non-nominated' members of staff. Inspectors may even be encouraged to leave pinstripe suits, embossed brief cases and bowler hats back at the office. Tours of larger business premises may also be arranged, generally accompanied by a nominated senior employee and the practitioner. For reasons of minimizing disruption to a business and preservation of confidentiality, it is often a good idea for the practitioner to do a dry run half an hour or so in advance of the Inspector's visit.
Visits to or meetings at taxpayers homes are going to be the exception rather than the rule. In fact, we can only recall two specific examples in our experience in tax investigations. The potential for causing distress to other family members, unless the visit is carefully managed is very great. However it can be a powerful weapon in persuading the Inspector of your client's lack of means etc and may be something the practitioner decides to agree to (or even invite) in exceptional circumstances.