HMRC's tax collectors have ruffled a few business people’s feathers in recent weeks by extending corporation tax enquiries into the affairs of company directors.
Tax advisers sticking up for the clients have been apoplectic. Barry Lewis, a
senior partner at Harris Lipman & Co told Accountancy Age that he
had never seen such aggressive behaviour from the taxman in his 40 years in the
HMRC has asked for the handover of directors’ financial affairs in relation
to corporation tax enquiries, or risk the use of formal powers under section 20
of the Taxes Management Act to do so.
Advisers are unhappy with the threat, and believe that section 20 is being
used because the self assessment enquiry regime is more constrained in its
ability to check directors’ details. The use of section 20 is not permitted for
HMRC to go on fishing expeditions, and this is really the sticking point.
‘While our clients are of course represented, there are thousands of
taxpayers who do not utilise the services of professionals and there is no
question that HMRC will seek to persecute the weak with these scatter-gun
tactics,’ said Lewis.
But HMRC is quite happy with its strategy. In fact the taxman says that
nothing has changed in its dealing with taxpayers or advisers on this particular
‘HMRC has not changed or altered its policy on extending corporation tax
enquiries into the financial affairs of company directors,’ said an HMRC
spokesman. ‘Where initial risk assessments indicate there may be inadequate
means or unexplained capital accretions it may be appropriate to request
directors’ personal financial information in the enquiry opening letter.
‘HMRC considers it reasonable to request this information at an early stage
to ensure that the enquiry is brought to as speedy a conclusion as possible.’
Chiltern tax investigations partner Steve Besford disagrees vigorously with
HMRC’s line. He believes that there is little justification in many of these
enquiries to open them up further, and has complained about the taxman’s
Besford says that if HMRC thinks it is fair to gain access to directors’
details in almost every corporation tax enquiry, then it should gain the powers
through legislation rather than argue each case one by one.
‘That may be something for the future, otherwise you’ll get conflict on every
case,’ says Besford.