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New Investigation System

HMRC have just announced something else around Tax Investigations. It’s called the Single Compliance Process (SCP) and it is a new system for tax investigations and runs to December 2011.

Interestingly, the SCP sounds the same as other systems piloted over the last couple of years with risk analysis and intelligence followed by audits over the phone to obtain information and then depending on what has been uncovered a single or cross tax investigation.

The major difference looks like HMRC looking to include Accountants in the investigation process. And, there are positive signs that HMRC will seek to avoid expensive “fishing expeditions” by using testing. Plus, they intend to work to their Litigation and Settlement Strategy principles which means they will not open an investigation unless it is cost effective to do so.

SCP will work on four different levels:

  • Level 1 will be to carry out an enquiry where there is no need for a face-to-face meeting, for example by correspondence, and with minimum inconvenience.
  • Level 2 will be a simplified and faster route for those cases where a lower intensity face-to-face is required.
  • Level 3 will be where more time is required because the depth and breadth of the investigation.
  • level 4 will be for the most demanding cases such as those indicating tax evasion or those highly complex in nature.

HMRC estimates that a maximum time to work each enquiry at each level during the pilot will be as follows:

Level 1 – 1.5 days

Level 2 – 2 days

Level 3 – 4 days

Level 4 – 8 days

Whatever the arrangements, the best defence and protection is good bookkeeping. If you are know your bookkeeping is not 100% then it maybe worth you getting in touch about our Financial Systems Review before the taxman knocks on your door.