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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

Introduction to assurance: tax advisers

In order that Revenue and Customs officers can determine whether or not a trader has properly accounted for the tax, they need to have access to the business records and accounts. Visits for audit purposes are generally made by appointment, during business hours and usually to the trader’s principal place of business.

Our practice is to deal direct with the trader. However, we welcome the involvement and assistance of tax advisers and recognise that there can be mutual benefits. However, the ultimate responsibility for the accuracy and timely submission of VAT returns rests with the person who is registered for VAT.

The following paragraphs give guidance on the legal powers and practice of the Department concerning access to business records and information, and which were issued after consultation and agreement with the Tax Faculty of the Institute of Chartered Accountants in England and Wales and The Institute of Taxation and the VAT Practitioners’ Group and deals with the position of tax advisers’ confidential advice and opinion.

A tax advisor (who need not be professionally qualified) is any person appointed directly by the client, or indirectly, via another tax adviser, to give advice on the client’s tax affairs.

A great deal of the information to which we have access is of a confidential nature. We must take great care to ensure that respect for confidentiality is maintained wherever possible.

As part of their services to clients, tax advisers communicate opinions or advice about clients’ past or future VAT affairs. Such communication can include notes of meetings and telephone calls, internal memoranda, letters and faxes and management letters. Depending on their content, such communications may, or may not be subject to Revenue and Customs’ statutory powers of access.

Revenue and Customs recognise that tax advisers have a duty of confidentiality to their clients. Whilst the duty of confidentiality may sometimes be overridden by legal requirements, Customs will not normally request the tax adviser, or the trader, to produce a communication relating to confidential opinion or advice, of the type described above.

Auditors’ working papers and management letters, except to the extent that they contain information relating to goods and services or supplies, acquisitions or importations, fall into this category.

In those cases where a document, such as a management letter or an auditor’s working papers, contains information of the type set out in the paragraph above, HMRC will normally accept an extract from the document, supported by a written statement from the tax adviser or auditor that in his opinion, HMRC do not have the power to see the other part or parts of the document.

The extract would include information about the origin of figures in accounts and returns and other information submitted to HMRC, or the relationship of those figures, with the books and records of the trader.

In some instances, we may request access to material to which they consider we may not have statutory power of access. When making such a request, we will make it clear to the trader that we are asking for something to which we may not have a right to see. However, the trader or his tax adviser may wish to consider whether access could be in the interests of the trader, for example, by facilitating the speedy resolution of his tax affairs.

Where there is a dispute about the information or records sought by HMRC requests for access will be made in writing to the trader, stating the reasons why we consider that such information is relevant, and the statutory power(s) under which they seek access. It is good practice to send copies of Confidentiality in VAT matters (Tax advisers) - Statement of practice leaflet 700/47/93 to the trader and their tax advisor.

The Information Disclosure Guidance Manual contains additional information on this topic. Traders will now have an opportunity to provide a blanket authority so that HMRC can authorise the Disclosure of Confidential VAT information on request to a named third party (usually an accountant).

When arranging, or commencing a visit, it is advisable for officers to confirm with the trader that they are happy for their representative to act for them, and that includes being notified of any discrepancies which may arise. We must still continue to advise the trader as well. If officers are not satisfied that the accountant is bona- fide, they should ask for the accountant’s letter of authority.

Detailed guidance on the legal powers and practise concerning access to business records and information can be found within CH250000.