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Taxpayers ‘Daunted’ by HMRC Self-Assessment Checks

Self-assessment taypayers are wary of receiving letters about random checks to their tax status, finds the latest HMRC research into communications with the public

They described the prospect of being personally selected for a check as daunting and worried about the consequences of potential mistakes being uncovered, according to the latest HMRC qualitative research into reactions to random compliance checks.

For many respondents, there was a general feeling that the tax authority should focus on large business tax compliance rather than small business and individuals. One respondent told researchers:

‘I’m annoyed that HMRC spend such valuable time looking into the business of small business owners when they should be concentrating on their best return of investment which would be making sure there’s no loopholes in our tax for the other end of the scale.’

Even before reading the opening correspondence, all participants said they would to engage with HMRC compliance checks in a timely manner. After reading the documents most said they would speaking directly with HMRC to clarify queries and confirm next steps; seek advice and reassurance from trusted sources within their network, and review and collate their records to prepare for the check.

Some respondents questioned the clarity of the communications, with some questioning what the next steps were, as this was not clearly laid out in the letter. They were looking for more details on how to send records, timings for the whole check, conditions for penalties and how open-source data could be used, and about definitions contained in the document, for example, there was low awareness of what the HMRC charter is.

Additionally, it was suggested that HMRC should clarify some of the more technical aspects of language used such as wording around penalties, HMRC’s charter, and the use of open-source materials.

Some worried about the consequences of potential mistakes being uncovered, and particularly those who felt less confident in dealing with their financial and tax affairs imagined worst-case scenarios, such as discovering they had submitted their tax returns incorrectly for years, resulting in owing HMRC large sums of money.

Even participants who were more confident in the accuracy of their self-assessment returns were apprehensive towards what they saw as an audit, and while they would comply with it, they expressed some nervousness about HMRC going through their affairs. However, the fact that taxpayers were allocated a named HMRC officer did help give them a little more confidence about the process.

Respondents said ‘it was seen as a way of avoiding laborious searches for the right answers on the HMRC website or spending their time re-explaining their circumstances to different officers at HMRC every time there was a query’.

Despite widespread acceptance that compliance checks were fair in principle (among both those who had and had not experienced one), some participants felt that targeting individuals and small businesses was unfair and that instead, HMRC should focus on larger organisations who evade relatively larger amounts of tax, to make the return on investment worthwhile.

To improve the quality and effectiveness of self-assessment checks, HMRC should focus on clarity about what is expected throughout the compliance check and clear guidance on what the process involves, provide a clear and fair reason for selection to avoid exacerbating participants’ concerns about potential mistakes they may have made when completing their self-assessment, reciprocity in the relationship with HMRC across the compliance check process and availability of accessible support tailored to taxpayers’ circumstances.

Respondents also called for the inclusion of details on a timeframe for resolution of the enquiry while they would welcome access to more specific links on the HMRC website to resolve outstanding issues.

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