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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Working the enquiry: reviewing earlier years: resistance

Some tact is always required when introducing the subject of earlier years. You must make a clear case for looking to include earlier years.

One reason for disquiet surrounding a broadening of your enquiry, apart from the additional tax, interest and penalties which may become due, is the desire to avoid a long drawn out and expensive enquiry. Often, you can allay fears on this score by emphasising that your intention is to achieve a conclusion that is broadly correct as simply and quickly as possible and that you do not intend to examine either the business or private side of any individual year in detail, subject to obtaining Statements of Assets at the beginning and end of the period. If you do feel that a detailed consideration of individual years is required, through capital statements, you should stress that agreement of a realistic timetable can keep the enquiry to a manageable duration.

If the decision to go back is made before the taxpayer has been seen (that is, on the basis of correspondence) or following a meeting at which current accounts only were considered, you should ask to see the taxpayer. Mention that the information produced raises points which would best be cleared by discussion and will include the question of earlier years. Although some justification will be needed and you may ask for documents to be produced, it is as well not to go into unnecessary detail at this stage. This can frequently lead to inconclusive correspondence, thereby delaying the required meeting. You should resist suggestions to make out a detailed case in writing. Enquiries carried on in this way can frequently drift on for month after month, even year after year, without the taxpayer being seen, and ultimately increase the costs on both sides.

If you are unable to agree the additional tax due on a self assessment at the time you have decided to reopen earlier years and the taxpayer is resisting your enquiries you will need to co-ordinate actions to overcome any delay. For example the taxpayer may make a request to the tribunal under Section 28A(4) for the SA enquiry to be closed EM1975+ and at the same time you may be waiting for books or information relating to the current and earlier years and the taxpayer may have appealed against, or asked for a review of your decision on, Section 29 assessments. If possible, it may be preferable to ask the tribunal to hear all disputed points together in linked hearings.