'The Taxman Always Rings Twice'

10 golden rules to survive a tax investigation
Taxpayers have good reason to fear investigation by HM Revenue & Customs. Now Daniel Dover, a partner at accountants BDO Stoy Hayward LLP, and financial writer Tim Hindle have written a book – 'The Taxman Always Rings Twice' – explaining the process, showing what is at stake and how to get through it. Here are their 10 golden rules.

Published: 9:42AM BST 25 Sep 2009

Comments 21 | Comment on this article


Quit while you are behind: there is no point trying to put one over the HMRC

1. KEEP CALM!
An investigation often provokes a number of violent emotions in those under scrutiny – not least sheer terror at the thought of ending up in jail. In reality, very few cases end in a custodial sentence. So there's no need to expect the worst.

2. GET EXPERT ADVICE AT THE OUTSET
If you are being investigated by HMRC, it is highly recommended that you seek out independent financial advice from a reputable accountant or adviser who specialises in this field. You will need somebody on your side who understands the jargon and knows how HMRC operates who can take some of the emotional strain from your shoulders. It's also likely to be cheaper in the long run.


Related Articles
Tax returns: pay up or pay consequences
Tax tip-offs recover £42m
'HMRC figures show taxes will have to rise – and steeply'
Stephen Timms: tax avoiders 'rob' hard-working families
Chancellor expects £1bn from Liechtenstein tax deal
Cut inheritance tax bills

3. DON'T DISCUSS YOUR TAX AFFAIRS WITH ANYONE BUT A TIGHT CIRCLE OF TAX ADVISERS
Tempting though it might be to offload your woes at the pub or the golf club, it's never a good idea – unless you want the whole town to know the details of your case; and that might include a taxman. It's also almost certain that what your friends advise you will be wrong and therefore detrimental to your chances of reaching a settlement with HMRC.

4. DON'T LIE TO HMRC
This is the simplest and most reliable way of avoiding that jail sentence!

5. DON'T ASSUME HMRC IS IGNORANT OF ANYTHING
An HMRC investigator has a huge number of resources at his disposal and is not afraid to ask questions. As the book says "Stick with the wartime advice: 'Careless Talk Costs Lives'. Letting a former flatmate know that you paid for your house in the Dordogne in cash is not literally going to kill you. But it may cost you the chance of getting a good deal with the taxman should he begin investigating your affairs."

6. BE WELL PREPARED FOR ANY MEETINGS
Remember the motto "no one prepares to fail – they fail to prepare". It is pointless trying to evade the HMRC's questions with insufficient preparation – the investigator will simply use his statutory powers to force you to give him the answers he seeks and your lack of preparation will be deemed to be "lack of co-operation".

7. MAKE SIGNIFICANT (BUT RELEVANT) PAYMENTS ON ACCOUNT
HMRC sees this as an important sign of a willingness to co-operate. It may also save you a huge amount in interest, which accrues from the date when the tax should have been paid to the day it is actually paid. On the other hand, overpayment of the outstanding liabilities may lead HMRC to an unrealistic expectation of the amount you owe.

8. DON'T TRY TO DESTROY EVIDENCE
It's usually unhelpful. If you don't have the appropriate records, HMRC may assume you are trying to hide something when you are not.

9. NEVER MAKE A PARTIAL DISCLOSURE
Do not suffer from selective amnesia when disclosing information involuntarily – this is particularly distasteful to HMRC and is likely to lead to a more punitive settlement since the HMRC will take into account your lack of co-operation when determining the penalty you have to pay as part of your settlement.

10. ONCE YOU HAVE REACHED A SETTLEMENT, DON'T OFFEND AGAIN
HMRC will view those who offend a second time in a much more serious light.

If you follow these rules you should survive a tax investigation – and may even do so with your sanity intact!

'The Taxman Always Rings Twice', published by Profile Books at £6.99, is available to order now from http://www.amazon.co.uk/

http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/6229873/10-golden-rules-to-survive-a-tax-investigation.html