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HMRC internal manual

Enquiry Manual

From
HM Revenue & Customs
Updated
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Working the Enquiry: Opening Meetings: Preparation for Full Business Reviews

When preparing it is not sufficient just to think broadly of `how the business is run’, or `what is spent each week’. There will be key questions, answers to which you will have to obtain.

The first meeting is particularly important. It will set the tone for the enquiry. In a straightforward case it may be the only meeting you need. Unless you have information about specific understatements, your objective will be to either have checked that the profits have been correctly returned, or to begin to work out the extent of the omissions

To do this you will need facts from the proprietor or directors to go with your examination of the business records.

The Running Of The Business

You will want

  • to consider the opportunities for diversions from business income and whether they might have occurred.
  • sufficient information to prepare a business model if you have established that the returned profits have been produced from unreliable records.

The Record-Keeping System

You will want to know

  • who completes the records (both on computer and manual),
  • how often they are written up and
  • whether there are any records, especially prime and non-financial records, which you and the agent have not seen.

The Proprietor’s Private Finances

You should explain the link with the business. You will be on strong ground if drawings have been estimated or are a balancing figure, and their level is apparently low. If this is not the case, the personal returns are complete and you have no doubts about the accounts, you should not take the enquiry into the private side.

Otherwise you will want to know about

  • the extent, in general terms at least, of the taxpayer’s assets, including those owned by minor children.
  • personal and private expenditure, if not in detail, then in sufficient depth to provide you with an idea of the general level of expenditure and any major exceptional items.