Update on HMRC intervention letters

We have previously reported on the new ‘intervention letters’ being issued to taxpayers by the Taxman.

Early feedback indicates that HMRC are asking about income which appears to have been omitted from the tax return for the year ended 5 April 2004. The normal deadline for HMRC investigating this year expired on 31 Jan 2006. Specifically we have seen this in the case of the omission of land and property income. This will most likely be based on information which HMRC have got from a third party.

Where the self assessment enquiry window for 2003/04 has closed, HMRC can only normally re-open it by using their formal powers relating to ‘discovery’. A discovery assessment may be made if the omission is attributable to fraudulent or negligent conduct on the part of the taxpayer or their agent.

Hence, we would advise to think very hard before co-operating with an intervention (as opposed to a discovery) on a closed year. Remember that participation in the interventions pilots is entirely voluntary and the taxpayer, or his agent on his behalf, would be entirely within his rights to refuse to take part.

In the absence of co-operation with the intervention HMRC may well choose to issue a discovery assessment.This will bring with it the protection of the formal SA framework including the right of appeal. It will also mean that HMRC reveal what information they hold.