HMRC Inspectors are back to work and we sense a hint of compassion, for now.
Inspectors back to work
Following the modest relaxation announced by the Prime Minister on 10 May 2020, Inspectors of Taxes are back working cases that were previously put on hold.
Does this mean things are back to normal? No.
Inspectors are largely still working from home, to comply with social distancing, but they are now seeking to reactivate ongoing cases and move matters forward.
It’s not just existing matters that are being worked either, HMRC are also commencing new challenges as well.
We understand Code of Practice 8 (COP8) cases, largely complex or high value matters (or both) not involving suspected tax fraud, are being started by HMRC.
We have also had dialogue with a small number of Code of Practice 9 (COP9) Inspectors (suspected tax fraud Inspectors) that have confirmed they are back working normally. This includes issuing the dreaded brown enveloped letter, advising the taxpayer that “HMRC has information that leads it to suspect tax fraud may have taken place.”
Are we back to normal?
Yes and no.
Arguably, Inspectors back working cases does mean an element of normality has resumed.
But, homeworking will have a bearing on logistics. For example, some HMRC communications have to be sent by recorded mail which is difficult for a homeworker to do. Inspectors are therefore shuttling work into tax offices to facilitate tasks that cannot be achieved from home. The new normal will mean things take longer, but will arrive eventually.
The new normal is also tinged, for now, with some realism and maybe a smudge of compassion.
HMRC are recognising that they are not the only ones with affected working practices and they are endeavouring to be reasonable with taxpayers in the current circumstances.
That may manifest in extended periods to reply and provide information, deferred payments and even a commercial approach to areas of difference.
Is now a good time to get matters resolved?
HMRC has backlogged activity and it is clearly seeking to free up future time. This seems to be translating into favourable outcomes for some.
It is also a good time to grasp the nettle and proactively take matters to HMRC to resolve. Whilst this is not an easy decision to make, don’t forget HMRC are in a phase of not being combative or aggressive. With skilled advice that can be preserved until the matter is concluded, HMRC will find it difficult to change tack unless prompted to do so.
The less aggressive phase will not last.
Do you wait and see?
It is for each taxpayer to judge whether or not they wish to take the risk and see if HMRC come calling.
Whilst waiting will buy time, it won’t buy resolution.
The press have liberally commented about the cost to the Exchequer of the current support during the pandemic, there are also questions now about how that is paid for.
We understand from Inspectors that they are being tasked to recoup as much as they can to balance the books. Inspectors will commence hunting for case work.
HMRC will treat matters they identify more harshly; the aggression and intrusiveness will return. They will be less inclined to be commercial. Responses will be demanded within timeframe, penalty costs will be higher and will be escalated if HMRC perceives a lacking of co-operation.
Naming and shaming could become more prevalent as HMRC make examples of taxpayers.
It’s good to talk
If you have a current matter with HMRC, seek advice, now is a good time to deal with it.
If you are aware you have a matter that needs to be addressed with HMRC, again take advice and be proactive.
It isn’t easy, at times it won’t be comfortable and there will be a financial cost, all of these will be much greater if the brown envelope arrives first before positive action is taken.