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HMRC internal manual

Technical Teams Operational Guidance

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HM Revenue & Customs
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Settling the enquiry: agreeing income profit additions: difficulties in drawing up specific figures

Where the facts of a case are in fundamental dispute (see TTOG4825), or where there are no, or inadequate records, whatever figures are produced are unlikely to be the true income or profits for the period of investigation. There is no option in these situations but to set out matters as best we can by using estimates and extrapolations.

Where a specific figure can be obtained it should be used rather than an estimate. Often that will not be possible or practicable so estimation becomes inevitable.

Estimates should always be identified as such in schedules we produce. They should always be reasonable in the whole circumstances of the case. We have to be able to justify the estimates we put forward to the taxpayer, the taxpayer’s adviser and where necessary the First-tier Tribunal.

Because of this care needs to be taken when advancing an estimate or contention in what might be the starting point of a protracted negotiation. It will be hard to increase an inadequate estimate once it has been made, but there should be no hidden penalties in our computations. An excessive estimate will weaken our case once it becomes identified as such. Plainly excessive estimates and hollow contentions are not acceptable.

Inexperienced Investigators should get guidance from their Team Leader and/or more experienced colleagues. Further guidance is available at EM3700 et seq.