Inland Revenue Causes Stir With ‘Enabling Letters’ To Small Firms

by Robert Lee, Tax-News.com, London

13 July 2004

The Inland Revenue has been sharply criticised for the tone of letters sent to self employed taxpayers and their advisors that purport to help individuals avoid making mistakes on their return forms, but which hint at the possibility of an investigation.

These so-called ‘enabling letters’ have been sent out with thousands of self assessment forms for 2003/2004 and imply that the taxpayer has made an error or omission on part of their tax return.

The letters state: "From a risk review of 2003 returns we have identified an aspect of the self-employment pages of your return which may need particular attention.”

The warning letter continues: "We want to help you get this aspect right first time which may avoid the need for an inquiry and I am therefore enclosing some 'questions and answers' which aim to help you with that part of the return."

The letter goes on to warn that taxpayers may face additional interest and penalties in the event that mistakes are found on tax returns.

Taxzone, which runs the website AccountingWeb, has reported that many letters have not originated from local tax district offices, and some appear to have been sent from compliance offices in other areas.

Accusing the Revenue of using “shock and scare tactics”, George Bull, a tax partner at Baker Tilly, told the Daily Telegraph: "At a time when the Inland Revenue is endeavouring to claim the high moral ground in the tax avoidance debate it does itself no favours by apparently treating small businesses as guilty until proven innocent."

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