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HMRC internal manual

Enquiry Manual

Examining Accounts: Records Examination - Planning: When to Examine Records

A meeting with the taxpayer at an early stage is an essential part of almost every accounts enquiry. It is the best way to find out how the business is really run and the pattern of private spending. There is no clear rule about whether you should see the taxpayer before or after examining the records. It will depend upon the circumstances of the particular case. You should bear in mind the following various points

  • Are there records which will be worth seeing? It is pointless delaying the meeting if the records are likely be inadequate and incomplete - better to have them brought in to the meeting.
  • If the taxpayer is unrepresented it is preferable to establish face to face contact as early as possible. Moreover, you will probably need to be told how the accounts figures were taken from the records.
  • You must establish whether or not the records are reliable. If they are not you may be able to use a business model or capital statement to suggest a figure of profit which seems likely to be more accurate than that declared.
  • A meeting will involve cost and inconvenience to the taxpayer. If the records are inadequate and apparently incomplete this adds to the need for a meeting. If, after examining the records, your doubts about the accuracy of the accounts are satisfied, this will remove the need for a meeting.
  • Conversely, you may feel you need a meeting before records examination to understand the system - this may well depend upon its size.
  • If the initial meeting takes place before the records examination, you may need a subsequent meeting to discuss your findings.