Tax enquiries tied up in more red tape
April 1 saw the introduction of the Taxman’s radical new rules for checking and making enquiries into your tax affairs. There’s also a new system for settling disputes. What do you need to know about this?
More options?
From April 1 2009 there’s a new procedure for settling disputes with the Taxman. He’s trying to sell it as a necessary change to protect your rights. In our view it’s about giving him more powers to demand tax. And so it’s vital you know how the new system works and what your options are.
First, a quick recap
Under the old rules if you couldn’t settle your argument with the Taxman, it would be referred to a local independent panel, known as the General Commissioners (GC). They would decide on the basis of the facts who was right - you or the Taxman. They had no specialist tax expertise and so based their decision on the facts and by taking a common sense point of view.
More procedure
Under the new regime if, for example, the Taxman was investigating your accounts, he can now simply conclude his enquiries when he wants to and tell you how much further tax he thinks is due. You then have three options:
• do nothing and accept the decision. You would then legally be liable for the extra tax
• appeal and request an internal review of the case. This will be done by a different inspector who will then tell you whether he thinks you were right or wrong. If you don’t like their decision, you can appeal to an independent tribunal
• ignore the Taxman’s review procedure and go straight to the independent tribunal.
If you choose the second or third option, you can suspend payment of the tax. But if you lose the case, interest will be added until it’s paid.
The right choice
The trouble is that the extra step of an internal review is likely to take up more of your valuable time and effort which could be better spent running your business.
Tip. You may be tempted to skip the hassle of using the Taxman’s internal review, although we recommend that you do use it - you may get lucky. And if not, it will give you an advantage if you do take the dispute to the tribunal.
Know your enemy
The new tribunal differs from the old one in that the panel will be made up of people with greater tax knowledge. They’re likely to take a dim view if you’ve not made every effort to settle the case before resorting to them. So that’s one good reason for using the Taxman’s internal review. Another is that, as part of the procedure, he’s required to set out in detail why he has rejected your argument. This will be very helpful information in preparing your case for the tribunal.
More formal
The new tribunal systemis run by the Ministryof Justice and will be more formal than the old GCs - so more like a court hearing.
Tip. Technical issues and presentation of the case are more likely to affect the result compared with the old system. Despite the cost, consider asking your accountant to represent you. Or at least prepare the documents for you to present.
For details on how to make an appeal against the Taxman’s decisions, visit http://tax.indicator.co.uk (TX 09.14.05).
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