EH370. Full enquiry

Where the case has been selected for full enquiry you should aim to identify and examine all the significant risks of error in the return, including the risk that it is fundamentally incorrect.

Extent of record examination in full enquiries
A full enquiry should always involve a comprehensive review of the underlying records. For business taxpayers this would include, where appropriate, a review of the private financial affairs of the taxpayer as well as the business records. Where the underlying business records were completely inadequate the enquiry might proceed almost entirely by review of the private side.The only circumstances in which you might not need to see actual records for every entry in the return are

  • where you can verify entries by other information held by the Department. For example, it may be possible to verify pay and tax details by information submitted by the employer. If you suspect that the employer is paying amounts which should be subject to tax and which are not included in the end of year return, you should refer the matter, though your Compliance Manager, to employer compliance staff
  • certain low risk claims to personal allowances. For example, claims to Married Couple’s Allowance (although you might want evidence in support of such claims in exceptional circumstances, such as where the wife’s name changes from one return to the next without explanation).You will sometimes need to use your judgement, however, in deciding the extent of the documentation needed to verify particular entries in the return.

Full enquiry not to be reclassified
Once a case has been classified as a full enquiry it should not be reclassified as an aspect enquiry.

In some cases you may take up a case for full enquiry and seek comprehensive information from the taxpayer because you have particular reasons for concern. You may find on examination of the records that your original concerns have no foundation. For example, you may find that there is a documented explanation of capital introduced or a previously unexplained increase in assets. Or you may find a satisfactory explanation for an apparent omission which you had suspected on the basis of third party information. Your assessment of the risks present in the case will obviously be changed, and this may affect the extent of your information requirements. But you should still carry out a proper full examination of the records underlying the return and any other records you reasonably require to satisfy yourself that the return is not incorrect in any other way.

Random selections
Random selections should be worked as full enquiries. They should not be distinguished from other enquiries in dealings with the taxpayer or agent. Your aim should be to identify and address all the significant risks in the same way as in any other full enquiry, and you should obtain and examine the records you reasonably require for this purpose. You should make sure that the taxpayer has claimed all the reliefs and allowances to which he or she is entitled which might be beneficial.

The records you examine should include those underlying the return, subject to the exceptions mentioned earlier. How far you should go beyond these will depend on the circumstances of the case. In particular you will have to think carefully, especially in a non-business case, about whether it would be reasonable to seek private side documents such as private bank account statements. Unless there appear to be particular risks which would justify examination of such documents, or such risks emerge from your examination of the records on which the return was based, it may not be appropriate to ask for such records.

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