What to expect if HM Revenue and Customs investigates you, the penalties that may be charged and what details about you can be published.
HM Revenue and Customs (HMRC) recognises that tax agents play a vital role in helping customers meet their tax obligations. But there is a small minority of tax agents who act dishonestly.
HMRC will normally look to prosecute dishonest tax agents, but when they can’t, the department needs civil powers to penalise them.
From 1 April 2013, new legislation allows HMRC to:
- investigate dishonest conduct by tax agents
- charge civil penalties
- publish the details of tax agents who have acted dishonestly
HMRC has worked closely with the professional bodies to develop this legislation which contains many safeguards and checks. These include tribunal approval for a file access notice, the right of appeal against some HMRC decisions and that key decisions must be authorised at a senior level.
Introducing this legislation will help HMRC protect the majority of honest, professional tax agents.
This guide explains what to expect if HMRC investigates you, the penalties that may be charged and what details about you can be published.
Tax agents and dishonest conduct - an overview
A tax agent is an individual who, in the course of business, assists clients with their tax affairs.
Dishonest conduct is when an individual acting as a tax agent does something dishonest with a view to bringing about a loss of tax.
What happens when HMRC decides that you have been dishonest
When HMRC has evidence of dishonest conduct a specialist officer (experienced in working with tax agents) will give you a conduct notice that sets out the evidence they have.
If you disagree with the conduct notice you can appeal by writing to the specialist officer dealing with the investigation within 30 days of the date of issue of the notice.
If your appeal is settled in HMRC’s favour, or you do not appeal within the 30-day period, the specialist officer can then:
- ask for access to your working papers
- charge penalties if they do not get access to your working papers when they ask for them
- charge you a penalty for dishonest conduct of between £5,000 and £50,000
- publish details about you if you are charged a penalty for dishonest conduct of more than £5,000
HMRC will expect you to do everything you can to help with the investigation. If you give any false information you could face a criminal prosecution.
When HMRC first contacts you they will give you a factsheet that explains the process and covers your principal rights and obligations, along with your rights under the European Convention on Human Rights. You can download the ‘Tax agents: dishonest conduct’ factsheet.
Asking for your working papers
To help establish the extent of the dishonesty, HMRC can ask for your working papers. If someone else has these papers, HMRC can approach them.
HMRC will confirm what they want to see and will ask for the papers to be given voluntarily. If they aren’t provided, HMRC can send a file access notice. A file access notice legally requires a person to give HMRC the documents that they want to see. HMRC must get permission from the independent tax tribunal to issue a file access notice.
You can’t appeal against the file access notice, but if someone else has received the file access notice, they can appeal. They do this by writing to the specialist officer dealing with the investigation within 30 days of the date of issue of the notice.
Please note: they can only appeal if they feel it is too time consuming or too much of a burden to get the papers.
If HMRC doesn’t get the documents required by a file access notice, they can charge penalties. The penalty is £300 initially and then up to £60 for each day the person fails to comply with the notice. There’s a right of appeal against these penalties.
Penalties for dishonest conduct
When calculating the penalty amount, HMRC will consider:
- if you told them about your dishonest conduct
- if you did tell them, whether you did so before you had reason to believe they were about to find out about your dishonesty
- how much help you gave HMRC to establish the extent of your dishonesty
- how you complied with any file access notices
The minimum penalty for dishonest conduct is £5,000. The maximum is £50,000.
You’ll be charged the minimum penalty if you tell HMRC everything you could about the dishonesty, and did everything possible to help them establish the full extent.
If you didn’t tell HMRC about your dishonesty and did nothing to help them establish the extent of it, HMRC will charge you the maximum penalty.
You can appeal against the amount of the penalty, but not the decision to charge you a penalty.
If you are charged a penalty of more than £5,000, then HMRC can also publish your details.
Publishing your details
If you are charged a penalty of more than £5,000, HMRC can publish your details on this website for up to 12 months. The decision to publish is made by a senior HMRC officer.
Details which can be published include:
- your name and address (business or private)
- the nature of your business
- the periods of your dishonest conduct
- the amount of the penalty
- any other details necessary to identify you clearly
HMRC will let you know in advance about their intention to publish your details and will give you at least 30 days to respond.
If you worked or still work for a company, their details can also be published to help identify you. Before doing this, HMRC will tell the organisation which then also has at least 30 days to respond.
Neither you or the organisation you worked for, can appeal against HMRC’s decision to publish these details.