If you have not deliberately done something wrong, you are looking at a bill for tax, plus interest, plus possibly a penalty. Even if you have acted deliberately (which is fraud), HMRC prefer to get money out of you than try to send you to jail. In cases of fraud, they have never prosecuted someone who came forward and voluntarily disclosed what he had done wrong. And only Special Investigations and Criminal Investigations Officers have had the training to ensure that they will not jeopardise a prosecution, so it is unlikely that an enquiry from anyone else will have such an outcome.
Who is the letter from?
If it is headed “Special Investigations”, don’t try to deal with it yourself, especially if it says, “we suspect you of serious fraud”. Get help. Although that may be costly, it will save you a lot of grief. If it is from someone else and you don’t want to pay an accountant, you can probably handle it yourself. But if you want to be your own tax advisor and are going to rely on HMRC to explain the law to you, you need to realise that their published advice is not always right, particularly if your facts are a little out of the ordinary.
If you’ve done something wrong, admit it
And if you’ve got other things wrong that HMRC haven’t asked about, admit them too. If they discover something in a couple of years’ time that you tried to hide last time round, they are likely to be very tough.
Don’t get too worried if the letter sounds aggressive
HMRC are not great at writing letters. In particular, although they seem to like the words “require”, and “need”, they actually have little power to require anything. They also often raise the spectre of penalties at an early stage and hold out an olive branch that if you co-operate these will be reduced. Co-operation doesn’t mean doing as you are told. It comes from the Latin for working together. It means not obstructing HMRC or ignoring their letters or creating long delays.
If HMRC want a meeting or want to speak to you on the phone, remember that they have no right to do either
That is not to say don’t speak to them, but rather to realise that if you choose to meet or call, you are volunteering to do so and as such can call the shots. If you would rather not speak to them, don’t. Standing on your legal rights is not non-co-operation. You are entitled to ask them to put their questions in writing. However, you should then respond relatively promptly.
Share this story