HMRC tactics: making you wait – for years
It’s an open secret within HMRC that investigations stay open because the HMRC investigator has found nothing but feels too embarrassed to close the case.
When an investigation is opened HMRC feel that there is something amiss. Officially, if they find nothing wrong the case should be closed down quickly, but because investigators have pressure put on them to get results they are reluctant to do this.
They hope that if they just keep on digging and digging they will find something – because everybody’s got something to hide right? But then the more they dig the more they are committed to getting a result.
This called ‘sunk costs’ and the more ‘sunk costs’ you have the more you are committed – even if you were wrong in the first place. The more costs you sink the harder it is to make an honourable exit.
This is actually bad for everybody concerned; it’s bad for the person being investigated as they have years of demands for paperwork and for meetings and a huge amount of stress, if they have paid advice it can be costly. It’s also bad for HMRC because they are sinking costs into cases that are going nowhere.
Law firm RPC have said that almost a quarter of all tax investigations launched by HMRC’s local offices are still unresolved more than 12 months on.
Adam Craggs, partner and head of RPC’s tax disputes team, said, “Introducing a more transparent timescale would ensure that HMRC completes its enquiries in a timely manner, thus keeping costs and disruption to a minimum.
“Currently, the only way to force HMRC to conclude a long-running enquiry is to apply to the tax tribunal for an appropriate direction.”
RPC added that HMRC previously had an incentive to close an enquiry in order to make a demand for tax. However, with the introduction of Accelerated Payment Notices (APNs), once HMRC receives the disputed tax, there is little incentive for them to progress matters.