Taking the Revenue seriously

You can’t help wondering what real-life tax inspectors thought about the Hector the Inspector advertising campaign of about 20 years ago. It portrayed a stereotypical bureaucrat wearing pinstripe trousers and bowler hat and sporting a toothbrush moustache. Was turning the taxman into a figure of fun in this way entirely deliberate? Certainly, if we’d been taxmen at this time, we’d have had our fears that this would lead to the public taking us less seriously than they should.

Actually, though, our own view is that there is a definite tendency on the part of taxpayers to take the Revenue far too seriously. We’ll explain what we mean.

While we haven’t reached the same kind of police state tactics on the part of the tax-levying authorities as they have across the water in the States or, more recently, in Australia, the official paperwork churned out by HMRC can still be highly intimidating and can intimidate taxpayers far more than it should. Seeing the HMRC logo on the envelope was enough for some people to completely freak out and throw the letter, unopened, into the bin. That’s an example of taking HMRC too seriously.

In any kind of organisation like the Revenue, you’re bound to get the jack-in-office or traffic warden mentality in some individuals. These individuals believe they are the law. The thing to do is to gently, or not so gently, remind them they are not. The Revenue is subject to the law just as much as anyone else is. This is where it’s really essential, if you are having any kind of serious spat with the taxman, to get properly qualified advice on your side. The accountant or tax adviser will know, or should do, precisely what the limits of the Revenue’s rights and the taxpayer’s rights are.

One of the most intimidating things the Revenue can do is open a so-called COP9 inquiry. The letters opening these inquiries have the word ‘fraud’ splattered liberally all over them, and a sensitive or ill-informed taxpayer could be forgiven for thinking that it’s only a matter of time before the Black Maria turns up outside their front door.

In fact, these opening letters are needlessly inflammatory and confrontational, in our view. A COP9 inquiry, in a strange sort of way, is really good news. Why? Because Code of Practice 9 (which is what the initials stand for) is a set procedure designed to enable you to put anything straight in your tax affairs that needs to be put straight, without the Revenue taking any kind of criminal action against you. The reality is that the Revenue prosecutes a very tiny minority of taxpayers every year. So don’t take all the threats so seriously that you jump off Beachy Head. COP9 can be seen as a lifeline rather than as a sentence of execution.

Another intimidating thing the Revenue can do is to issue massive assessments to tax. The word ‘assessment’ is a technical one, and the amount of money it asks for on an assessment may actually bear no relationship at all to any reasonable amount of tax you may end up having to pay. Inspectors tend to look at it very much as a first shot across the bows, and the psychological impact of receiving a piece of paper with a huge number on it is something that, frankly, they care very little about.

Don’t stick your head in a gas oven when you get the big assessment, then, but take the proper advice (if you need to) and put in all the correct appeals etc. Bear in mind, in this context, that the Revenue cannot demand instant payment of the assessment unless the criteria for an advanced payment notice are met and the APN is actually issued. See elsewhere on this subject, in our ‘A to Z of Tax Planning’ article.

Finally, if the taxman threatens to pursue you as far as the tax tribunal, take this, too, with a pinch of salt. The Revenue normally wants to avoid this sort of confrontation if it can, but it will never own up to this.

And whatever you do, don’t crawl to the taxman. He won’t respect you any more for it and, we think, is more likely to see you as a soft target. Stick up for your rights.