Introduction: types of enquiry: full and aspect
A full enquiry seeks to address all the significant risks of error in the return, including the risk of the return being fundamentally incorrect.
It should always involve a comprehensive review of the underlying records. For business taxpayers this would include, where appropriate, a review of the private financial affairs of the directors or taxpayer as well as the business records EM3550+. Where the underlying business records were completely inadequate, the enquiry might proceed almost entirely by review of the private side.
Most of the full enquiries undertaken into returns for taxpayers with no business source will be enquiries into returns for non-business taxpayers with complex tax affairs, for example company directors with several other sources of income, overseas interests, etc.
You must work such cases to the same standard as enquiries into returns for business taxpayers. You will be seeking to check the entries on the return using the taxpayer’s own records and any third party information available.
Once a case has been selected for full enquiry, you must not reclassify it as an aspect enquiry. It should always involve a comprehensive examination of the return.
In some circumstances you may take up a case for full enquiry and seek comprehensive information from the taxpayer because you have particular reasons for concern. You may find on examination of the records that your original concerns have no foundation. For example, you may find that there is a documented explanation of capital introduced or a previously unexplained increase in assets. Or you may find a satisfactory explanation for an apparent omission that you had suspected based on third party information. Clearly you will have changed your assessment of the risks present in the case, and this may affect the extent of your information requirements. You should still carry out a proper full examination of the records underlying the return and any other records you reasonably require to check that the return (and therefore the tax position of the taxpayer) is not incorrect in any other way.
Aspect enquiries are those which fall short of a full, in-depth examination of the whole return but instead concentrate on one or more aspects of it.
Aspect enquiries therefore cover a wide range of casework carried out by all officers.
Any box on the SA return or any entry in the `free format’ spaces could be the subject of an aspect enquiry, as could any accounts entries in CTSA cases. Enquiries that address several aspects of the return will still be aspect enquiries wherever the scope of the enquiry falls short of a full examination of the return.
To check that returns are correct and complete you should
- aim to establish the facts behind particular entries,
- obtain explanations where those entries appear doubtful, and
- test those explanations, where appropriate, by reference to available evidence.
Aspect enquiries, although more limited in scope than full enquiries, should not be seen as any less thorough or investigative.
In an aspect enquiry, an adjustment may give rise to a penalty. Do not reclassify aspect enquiries as full enquiries just because they result in culpable additions to profits.
If we make a decision to work the case as a full enquiry, you should change the classification to full, see EM1905.
Where a `technical’ error leads to an adjustment to increase the taxpayer’s liability and it appears that the error was due to
- negligence in the preparation of the return, or
- careless behaviour in the preparation of the return for a period beginning on or after 1 April 2008 with a filing date on or after 1 April 2009
an SO or above should consider the question of a penalty before it is raised with the taxpayer or agent.
It is important to assess the risks in every enquiry for cross tax issues. If you find any new risks, you should consider whether they have any significance for any other tax or duty. For example, if you establish there are omitted sales and the turnover is above the VAT threshold, further VAT may be due. If the business used the income from these sales to make ‘cash in hand’ payments to employees, further PAYE may be due.
If any of the risks apply to any other tax regimes, it is important to involve colleagues who have the relevant expertise at the earliest opportunity. This can reduce the amount of time spent and cost for both HMRC and the customer.
If you suspect evasion, you must consider making an immediate referral to the Evasion Management Team, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) .
(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) There are in general two types of referral criteria, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) . The first relates to volume crime risks and applies if certain conditions are met, no matter how much the PLR is. The second applies when the PLR is £50,000 or more across all heads of duty. If any of the criteria apply, you must refer the case to the Evasion Management Team.