Pitfalls of telling all to the tax man

AFS Team·13 January 2012·3 min read
Pitfalls of telling all to the tax man
Accountants may be the resort for tax advice - but they are not necessarily the best people to act for clients if they are in conflict with HM Revenue & Customs. Most tax agents - accountants and tax advisers - do not receive formal training about gathering evidence and representing clients at tribunals. As a result, they may be unaware of some of pitfalls of presenting evidence. Many agents opt to give reams of extra details about the financial affairs of their clients on the additional information pages of tax returns. Rather than fill in these sections as a matter of course, they should consider what happens to the information. The suggestion is not about withholding relevant information from HMRC, but not giving the tax man details he or she does not need to know. Any policeman or solicitor will tell you that questions in court should just be answered with a yes or no and no extra information should ever be volunteered. The thinking is this can only help the other side undermine your case. Telling the tax man extra details about your finances can lead to more questions and disclosures. In fact, a recent tax tribunal case would support this view. In Moore v CRC earlier this year, the taxpayer added additional information about how the figures in the boxes on the tax return were calculated on the advice of his accountant. The calculations did not follow HMRC guidelines. The judge commented that the taxpayer's self-assessments were not based upon what he wrote in the additional sheets, but what was entered in the boxes. Tax agents tell clients to offer additional information in the hope that the details negate the reasons a tax inspector can ask for documents and explanations as discovery. Experienced tax agents who regularly deal with tax investigations will journal the figures in every box on the tax return - journals are breakdowns of the transactions and calculation that lead to the figure in the box. They will also let the tax man ask for more information - and provide the specific answers to specific questions rather than open a Pandora’s Box for HMRC.