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Tax advisers who submit a high volume of income tax refund returns may receive an HMRC letter asking them to sign a memorandum of understanding aimed at reducing the risks attached to such claims.
The document – headed Self Assessment Returns Resulting in a Repayment: Sharing Risk Concerns – claims it “does not constitute any type of formal enquiry or compliance check”.
Tax advisers who submit a high volume of income tax refund returns may receive an HMRC letter asking them to sign a memorandum of understanding aimed at reducing the risks attached to such claims.
The document – headed Self Assessment Returns Resulting in a Repayment: Sharing Risk Concerns – claims it “does not constitute any type of formal enquiry or compliance check”.
Advisers are asked to ensure clients are aware of their obligations to maintaining records, particularly in connection with expenses and construction industry scheme income and deductions. Paragraphs six to eight explain the level of evidence required before expenses exceeding a certain level will be accepted:
“6. No return on behalf of a subcontractor, who has not maintained any business records to evidence levels of expenditure incurred, should be submitted with the expenses to turnover ratio exceeding 10%.
“7. A return on behalf of a subcontractor reflecting the expenses to turnover ratio in the range 10% to 20% should be based on kept records. Sample assurance tests should have been undertaken to confirm records are held to support the returned figures.
“8. Any return on behalf of a subcontractor reflecting the expenses to turnover ratio over 20% should only be submitted if all the records have been seen and are available to support the figures shown on the return.”
The letter includes guidance on preparing returns for construction industry clients, outlining the Revenue’s agent initiative, the taxpayer’s recordkeeping obligations, and the information available on the taxman’s website.
Advisers are not obliged to sign the memorandum, but those who choose not to do so are warned that clients’ returns could be subjected to “formal enquiries to test [their] accuracy”, or a “temporary repayment stop” may be placed on returns to allow HMRC to “undertake a number of assurance tests to confirm the returns are accurate and the repayments are due in the amounts claimed”.
