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  • Tax - Request for closure of enquiry letter
    Request for closure of enquiry letterIf you believe you've given HMRC all the information it has requested, you can ask it to close the enquiry. Your first step is to write a letter asking for the enquiry to be closed or for details of the further information it requires.Stalled enquiryIf the inspector running the enquiry has already dragged out the investigation and nothing seems to be happening use our Request for Closure of Enquiry Letter.ConsiderationsVarious factors should be considered before applying...
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  • Tax - Enquiry - capital statement checklist
    Enquiry - capital statement checklistDuring an enquiry HMRC may require a so-called capital statement to be prepared. Preparing an accurate statement is important to settling the enquiry. Use our checklist to help you produce your capital statement.what is a capital statement?If there is difficulty in obtaining business records for earlier years, any attempt to recalculate omissions fairly precisely for individual periods will usually rely partly on the capital/income/expenditure reconciliation. A capital statement...
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  • Tax - Key events chart
    Key events chartIf you are subject to a personal tax enquiry, deposits on your bank account statements could be taken to be a second source of income by HMRC. Therefore, it's a good idea to keep an up-to-date record of these rather than relying on your memory, or an expensive exercise by your advisor later.Unidentified bankingsThe most common verbal explanations for unidentified bankings, or deficiencies in income when compared with personal expenditure, are: cash savings, gambling winnings, legacies, loans...
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  • Tax - Changing interview notes
    Changing interview notesIf you attend an enquiry interview, the tax inspector will make their own notes of what they "think" was said and use them against you if they can. They will probably try to get you to sign them as a true record of what came up at the meeting. Should you?Read the notesNever sign notes at a meeting. Gain yourself some thinking time by saying you would like to go over the notes in some detail. Ask the inspector to send them to you. Go through the notes looking for all the things that are...
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  • Tax - Enquiry - private expenditure record
    Enquiry - private expenditure recordDuring a full enquiry into your tax return, if you are self-employed you can expect the inspector to start asking questions about your private expenditure. The presumption is that any "missing" takings from the business will show up as personal expenditure. Providing an accurate summary of your outgoings can help convince HMRC otherwise.A full enquiryIf you're subject to a full enquiry into your tax affairs, you may be asked to draw up a list of private expenditure for a year...
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  • Tax - Checklist for challenging an HMRC business economics exercise
    Checklist for challenging an HMRC business economics exerciseIn the pursuit of tax collection targets there is now a much greater willingness by HMRC to displace the profits shown by your accounts with an estimate based on a simple business economics exercise. Our checklist can help you identify flaws in HMRC's calculations. Missing incomeA typical example of a business economics exercise would be for HMRC to use a mark-up of purchases to selling price and construct an anticipated sales figure. The next stage...
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  • Tax - Product mix reconstruction
    Product mix reconstructionWhen carrying out a business economics exercise, the tax inspector will often use an industry average mark-up of purchases to selling price to construct a sales figure. But this simple calculation doesn't take into account your business's product mix. Use this template to demonstrate that the inspector's calculations are based on flawed assumptions.Establish your product mixAs most businesses sell more than one item, the first step in challenging an inspector's business economics exercise...
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  • Tax - Enquiry - challenging a business economics exercise
    Enquiry - challenging a business economics exercise There can be many reasons for challenging an HMRC business economics exercise, but you must have good grounds for doing so. Are your records deficient?HMRC's business economics exercise approach to increase taxable profits cannot be justified unless the records have been shown to be deficient in some way. An inspector should be able to demonstrate that: (1) There are deficiencies in the records.(2) The results shown by the accounts are not credible.(3) Drawings...
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  • Tax - What HMRC is likely to ask
    What HMRC is likely to askThere's a pretty standard set of questions that the inspector will ask at interview. These are mostly designed to undermine the records you've kept and so allow them to make a demand for tax on missing income/profits or over-claimed expenses. So how should you prepare for such an interview? GuidelinesIf you attend an interview, the inspector should start by explaining that they will ask questions and take notes on your answers. It's best to answer all questions truthfully but not to...
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  • Tax - Wastage losses record
    Wastage/losses recordHMRC typically uses a mark-up of purchases to selling price to construct an anticipated sales figure. However, this doesn't generally allow for wastage/write-offs. So what simple records could you keep about "wastage"?Wasted stockProduct losses can take many forms: discounts and other price reductions made to specific groups of customers or in response to competition; special offers; annual sales; scrappage of stock; wastage arising from spillage, breakage, processing, perishables or inexperience;...
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