Letters from HMRC about tax avoidance are normally sent either as an enquiry or a notice of enforcement as an initial step when investigating tax avoidance schemes or conventional underpayments of tax liabilities. More seriously, correspondence from HMRC may indicate that there are ongoing Code 9 enquiries, although for most cases of fraud and criminal behaviour no such “tipping off” will be provided until the investigation has concluded.
In the event such letters are ignored, this can lead to the imposition of substantial penalties (in addition to any tax liability) or prosecution.
- HMRC will in most circumstances (when a suspicion of tax avoidance exist) write to the tax payer and set out details of such suspicions and invite representations and disclosure of any tax avoidance scheme you may be a party to;
- the purpose of this is to save time and the expense of investigations, with the incentive to the recipient of less onerous penalties or alternatively the incentive of avoiding prosecution.
- similar advantages are offered by HMRC in respect of HMRC’s Worldwide Disclosure Facility.
However, from experience the first thing you should not do, upon receiving any HMRC correspondence, is ignore it – HMRC (unlike other creditors) will not go away and they have received substantial funding from central government to pursue enforcement of tax liabilities and, for tax avoidance schemes, actively and investigate such schemes as part of its anti-avoidance tax policy.
Ultimately, if such correspondence is ignored then the next stage, for conventional tax arrears, will be an assessment of the liability (if returns are not submitted) and then the presentation of a winding-up petition or a bankruptcy petition. Where letters from HMRC in respect of a suspected tax avoidance scheme are received, an accelerated payment notice could be served demanding payment of the unpaid taxes and/or a follower notice in respect of any decision made on such a tax avoidance scheme (with the associated insolvency thereafter).
At Francis Wilks & Jones we have considerable experience of negotiations with HMRC, including accelerated payment notices, personal liability notices, VAT security or appeals to tax tribunals and insolvency claims by liquidators.