HMRC may telephone taxpayers in connection with a tax compliance review. Nichola Ross Martin says, "Make sure you keep a note of exactly what you say".

HMRC is telephoning businesses during the course of its new compliance review checks see Tax compliance: powers to inspect businesses  the regime applies from 1 April 2009).

The taxpayer is asked for information about his business and record keeping and accounting systems. This information may then be used by HMRC to create a notice requiring the taxpayer to provide further information and documents. These may be later verified by HMRC at in a compliance visit.

Speaking at the ACCA annual conference last week Nichola Ross Martin, Tax Director of told attendees that that it is vital that taxpayers are prepared for this kind of call. They will need to consider their response and keep a record of what is said during such a telephone conversation. 

“The consequences of getting some of the details wrong could be quite drastic.  

If you have indicated to HMRC that you have certain systems and records in place by telephone, these will be specified by HMRC in its notice to you. If you cannot produce them you face the prospect of a fine for obstruction. You are then in something of an embarassing situation, because you also cannot appeal against a notice which requires you to produce your statutory records.

The result could be that you have a good chance of being accused of being recklessness which certainly amounts to carelessness, or worse still could, in an officers' eyes indicate a deliberate attempt to mislead."

Useful links:

Client guide to "Reasonable care and tax penalties"
A guide covering the new tax penalty regime for you to print out and discuss with clients