Taxes Management Act 1970 Section 9a

What is ‘Section 9a, Taxes Management Act 1970’?

‘The Taxes Management Act 1970 Section 9a’ is the name of the legislation that gives HMRC the power to investigate a taxpayer’s tax return.

HMRC can use TMA 1970 Section 9a to commence and enquiry up to 12 months following the filing of a return. You will sometimes hear such an enquiry referred to simply as ‘a section 9a enquiry’.

What should I expect during a Section 9a enquiry?

As part of HMRC’s investigation, it may request copies of business records, ask for a meeting with the taxpayer, or both.

We specifically recommend that clients DO NOT attend any meetings with HMRC. It’s our advice that all communication should be conducted via written correspondence.

Written correspondence provides a much more accurate record of what has (or hasn’t) been said. This is particularly useful should we need to appeal any HMRC decision at First Tier Tax Tribunal.

In addition to this, meetings with HMRC often result in ‘fishing expeditions’. HMRC routinely attempts to obtain all manner of seemingly irrelevant information. The taxpayer then sees this information used against then later in the enquiry.

Under TMA 1970 Section 9a, there is no requirement for a taxpayer to attend a meeting with HMRC.

We can resist any requests made for information by HMRC where we feel the information requested isn’t relevant. This is done by inviting HMRC to issue a ‘Schedule 36 Information Notice’ – a formal request for the information. The Schedule 36 Information request itself can then be challenged by us at First Tier Tax Tribunal.

Concluding a Section 9a enquiry

Following HMRC’s enquiry, one of three things usually happen:

HMRC is content with the information provided and no further action is taken (this is rare).

Following the ‘Section 9a Enquiry’ HMRC undercovers one or more less serious inaccuracies that will need to be addressed.

The enquiry results in HMRC finding one or more deliberate or non-deliberate inaccuracies. In this scenario it will likely launch a full tax investigation under Code of Practice 8 or Code of practice 9.

It’s worth remembering that HMRC doesn’t have the last say in any tax decision. For example, First Tier Tax Tribunal can overturn any HMRC decision.

If the thought of attending Tribunal makes you feel uneasy, don’t worry. We can handle everything. From filing the initial appeal, all the way through to representation on the day. You can find additional information regarding Her Majesty’s Courts and Tribunals Service on the ‘.gov’ website by clicking here.

It’s even possible to use HMRC’s own procedures to guarantee immunity from criminal prosecution – in cases of deliberate tax fraud. A voluntary disclosure under Code of Practice 9 offers complete immunity from criminal prosecution, in return for a full disclosure.

What should I do if I have a Section 9a enquiry?

An enquiry under the Taxes Management Act 1970 Section 9 can lead to something more serious. Seeking professional advice immediately can stop matters getting out of hand.

Whether you don’t believe you’ve done anything wrong, are aware of non-deliberate inaccuracies or have deliberately falsified your tax return, we can help.

At T M Sterling, we offer a free initial consultation to anyone who needs to speak to an expert. We can talk through the Taxes Management Act 1970 Section 9a and the various options available to you. You’ll then have specific and actionable advice that you can use moving forwards.

Call us today on 01656 724806 or send us a message to arrange a free consultation. What do you have to lose?

How Far Back Can HMRC Go?

So, you’ve probably been asking yourself ‘How far back can HMRC go?’. This varies greatly. Depending on the nature of the error it could be as much as 20 years.

Careless – 4 years

If HMRC finds an error resulting from ‘careless’ behavior then the maximum it can go back is 4 years. This is an error that it considers has been brought about by an innocent mistake.

As an example, let’s take Mr Smith. Mr Smith lives in London and simply missed a ‘0’ off the end of his dividend income when completing his self-assessment return. HMRC are likely to consider this careless. Therefore HMRC can only ‘go back’ 4 years when looking at his tax affairs.

Negligent – 6 years

If HMRC believes that someone’s ‘negligence’ has caused an error, then it can investigate going back a maximum of 6 years.

In this example, let’s looks at Mr Jones. Mr Jones lives in Birmingham and runs a small corner shop with his wife. Mr Jones knows that his wife has very little understanding when it comes to accounts. She’s made several errors previously, but Mr Jones has always insisted that his wife completes his company’s VAT returns.

In this example, HMRC are likely to consider Mr Jones’ actions negligent. This is because he had just cause to be able to foresee errors being made but did nothing to stop this happening. How far back can HMRC go? The behavior is negligent. Therefore, HMRC can review Mr Jones’ tax affairs going back a maximum of 6 years.

Deliberate – 20 years

20 years is the maximum amount of time that HMRC can go back and is reserved for cases of deliberate behaviour. HMRC must be able to prove, on the balance of probability, that the tax loss to HMRC (or potential lost revenue/PLR) has been brought about as a result of deliberate behaviour; the burden of proof rests with HMRC.

Ultimately, if HMRC are unable to convince the First Tier Tax Tribunal that the individuals actions were deliberate then the actions can only be considered ‘negligent’ at most – the timescales and penalty levels will need to reflect this.

In our final example, let’s look at…Mr Singh. Mr Singh is a self-employed builder and his wife has recently had a baby. Much of the work that Mr Singh carries out is paid for in cash, so Mr Singh decides to not declare 25% of his earnings on his self-assessment tax return as the extra money will certainly come in handy.

HMRC subsequently investigates Mr Singh’s tax affairs and discover that things just don’t add up. In this case, HMRC will likely raise tax assessments for the ‘potential lost revenue’ based on what they think Mr Singh owes – whether HMRC are accurate or not is another matter to be discussed separately. How far back can HMRC go in this case? Theoretically, HMRC could go back a maximum of 20 years when raising their assessments (deliberate behavior). This will also impact on the penalty level and interest amounts with this in mind.

Other Implications – HMRC Penalty Levels

As well as the nature of the discrepancy (i.e. careless, negligent or deliberate) influencing the amount of time HMRC can go back, there are also penalty levels to be considered. As you may expect the penalty levels attributed to ‘deliberate’ behaviour is often far greater than ‘negligent’ and ‘careless’ actions respectively.

Therefore, it’s important to not only consider the amount of time that HMRC can legally assess. We must also consider the penalty levels attributed to each scenario. It’s important that you or your representative can effectively convince a tribunal judge that your behaviour was careless as opposed to deliberate. This will not only ‘save’ on the number of years that can be assessed but also the penalty levels attributed to each year.

Penalty Calculations

To illustrate this, let’s look at one final example. For the past 10 years Mr Williams has underdeclared his income by £20,000 per year. HMRC has therefore raised assessments for 20% of the under declared income for the full 10-year period and added interest charges. HMRC consider Mr Williams actions to be deliberate. So, 10 years x £4,000 = £40,000 + penalty charges @75% = £70,000 + interest charges = £75,000.

Mr Williams’ representative appeals to First Tier Tax tribunal and effectively argues that the actions were careless. Therefore, HMRC are limited to assessing 4 years and to implementing lower penalty levels. Mr Williams’ liability may now look something like this. 4 years x £4,000 = £16,000 + penalty charges at 25% = £20,000 + interest = £21,500.

Ultimately, by being able to argue the Mr Williams’ actions are careless he has saved £53,500!

Clearly, all the example are based on assumed figures – but the principles behind ‘How far back can HMRC go?’ still apply.

If you have a tax problem that you need help fighting, then please call us today and we’ll arrange an initial consultation where we can identify the most effective way forwards.

Currently browsing: Tax Tribunal Appeals