Receiving notice that the Inland Revenue intends to enquire into your personal return, or the return of a company of which you are an officer, is never going to be a pleasant experience. The enquiry will normally be costly for you in several ways: time away from your business; fees payable to your advisers; and additional tax liability and interest thereon. If you are adjudged negligent in the completion of a return that turns out to be incorrect, penalties will generally be applied on top, and to add insult to injury the costs of the enquiry will not be tax-deductible.

Most people who receive a notice of enquiry will contact their agent immediately. It is for the agent that this book is written. If you are the agent and you don’t already have something similar and up-to-date, consider buying this book. It is as comprehensive as a book of this length on this subject can be and more importantly, where it is not it says so. It is written in intelligible and unhysterical language. The author is an experienced accountant and former tax inspector with many years of experience of enquiries. Although I take issue with some minor elements of it below, this is not to take away from the excellence of the whole.

It is my experience that the training of new inspectors has changed to emphasise their role as more investigative and facilitative, ensuring that the right amount of tax is paid at the right time, rather than an adversarial process. The enquiry process need not be adversarial so long as defence of your client’s interests is combined with pragmatism about the overall result of an enquiry. So I would suggest that the statement in 1.21 that “things remain largely as adversarial as they ever were” is unhelpful.

Occasionally the author refers to an outdated statement of the Revenue’s approach in support of a disagreement with present Revenue policy such as, at 4.36, an address by an inspector to the 1979 Taxation conference about incomplete records. Pursuing arguments based on this will not be easy. Collection of tax and expectations of the taxpayer have moved on. For example, very few businesses which operate in a retail environment still work without an electronic till and retaining till receipts is as simple as can be. Again, at 3.18 and 11.48 the reader is cautioned to prevent the client being exposed to excessively expensive requests for information, such as the costs of obtaining duplicate bank statements for non-business accounts, but times and the law have moved on and cost should not be used as an excuse. Doing this cheaply is straightforward. The client could make an application to the bank for the records under the Data Protection Act. This should limit those costs to the fixed fee payable under that Act.

In terms of achieving a speedy settlement with the Revenue, the reader should use care when relying on the author’s interpretation of grey areas where the cautious term ‘it is arguable’ is used, such as at 4.66 on the preservation of records. Some of these areas may be arguable but most clients would not be able to spend tens of thousands of pounds in legal fees on ground-breaking litigation.

The author suggests several times – such as at 12.37 and at 12.44 – running an objective and critical eye over the client’s books and papers as soon as possible after the enquiry notice has been received. This advice is central to a satisfactory resolution of the enquiry and could save a great deal of trouble and expense later. However, outside of the section on the Hansard procedure, I did not find unequivocal advice that where such a critical eye reveals failings the client should be urged to make a prompt and full confession of those failings to the Revenue. This should receive serious consideration and remains sufficiently rare in practice to attract very favourable penalty abatements.

My biggest quibble with this book is the order of the text. Chapters 2 to 8 are indigestible but since they deal with the minutiae of enquiry that is inevitable. Don’t be put off by them. They are usually more comprehensible than the Revenue Manuals. But the reader should read Chapters 1 and 9 to 23 before dealing with them, so as to have an idea of how the enquiry is likely to progress.

The book is designed to be dipped into – there is some repetition of material to this end – but I would recommend an inexperienced agent to read it all. And most agents would benefit from reading such a book if they apprehend an enquiry into a client in the near future. Its up-to-date nature means that almost everyone will learn something.

George Gilham, Tax Advisor at Dorsey and Whitney LLP

The Tax Journal, Monday 24 January 2005

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