HMRC internal manual

Technical Teams Operational Guidance

Investigation work: Code of practice 9: examining the disclosure report: Third party investigation to test Disclosure Report

The principles and techniques of third party investigation are dealt with in SIOG. Once the initial examination of the Disclosure Report is complete consideration needs to be given to whether third party investigation needs to be undertaken.

The extent of third party investigations to check a disclosure report will vary depending on the case, our concerns and the quality of the report. Third party enquiries should not be undertaken lightly. They should only be made where the Investigator considers it necessary. If the area is a sensitive one the investigator should seek the authority of the Team Leader before proceeding (See SCIG10610).

There is no aspect of third party investigation work that is mandatory. Investigators have to judge in each case what needs to be done but they need always to be sensitive to the damaging effect that enquiries may have to the reputation, business or otherwise of the taxpayer. Where the risk is considerable great care needs to be taken to ensure that any action is appropriate and justified. If the taxpayer or agent objects to third party investigation on the grounds that it would be damaging the Team Leader should seek guidance from the Assistant Director.

There will be some cases where minimal third party investigation work is required. An adviser may be able to show that he/she has conducted all the investigation that could reasonably be expected. The business side may be fully analysed and reported upon, private bank statements obtained and analysed, property details obtained from solicitors and so on. The adviser may set out all correspondence to demonstrate the provenance of the information obtained.

Although the Investigator does not need to duplicate all the work that the adviser has done, he or she still needs to be satisfied and may carry out third party work in order to test the conclusions in the report

Where mandates have been provided Investigators should usually use them rather than proceed to use the formal information powers under paragraph 2 Sch 36 FA 2008. This particularly applies to bank mandates.

Advisers and their clients, may not be able to readily obtain some information which the Investigator would wish to see. Internal documentation created and retained by a bank is an example. Where access to such information is considered necessary the Investigator may decide to use formal information powers to facilitate the examination of the report. However, Investigators should remember that organisations are required to follow the provisions of the Data Protection Act, and should consider what that may mean for the existence if relevant material unavailable to the taxpayer. As with any other decision point, adequate records should be maintained to demonstrate why third party enquiries were or were not authorised or considered necessary.

Guidance at CH232000 and SIOG7620 should be followed carefully when seeking to use formal powers to obtain a bank’s internal documents.