Read our guide to understanding the investigation process
One of HMRC’s responsibilities is to check that the correct amounts of tax have been paid at the right time.
To do that, HMRC may need to:
When a request for information is made HMRC will need to ensure that:
‘Reasonably required’ means getting the balance right between:
Information or an inspection can only be reasonably required where it could affect a person’s tax position. If having the information or carrying out the inspection could not affect a person’s current or future tax position it is not reasonable for HMRC to request it.
So, HMRC must be able to show why seeking the information or carrying out the inspection may help it decide what the correct tax position is, or to ensure that the correct amount of tax is paid or overpaid tax is repaid.
Restrictions on the types of documents and information that HMRC can require or inspect, even if they would otherwise be reasonably required to check a person’s tax position, cover the following.
Old documents
This is a document that was entirely created more than six years ago. Such an old document would normally be expected to affect only a tax position that can no longer be changed because the assessment time limit has expired.
However, an old document might be required if it affects the tax position of a later period. For example, for a chargeable gain calculation the purchase agreement for the asset in question might be required in order to check the cost figure used in the calculation.
An old document might be required where there has been a deliberate error in a return which means that the assessment time limit is extended to 20 years.
Appeal material
A person is not required to provide information or produce a document that relates to the conduct of a pending tax appeal. This is a document that has been brought into existence as part of the preparation for the presentation of a tax appeal. It does not cover documents which may be used in presenting the appeal, for example as evidence, but which existed before the appeal process began.
Personal records
A person is not required to produce personal records as the information in itself is not normally required to check a tax position.
‘Personal records’ means records concerning any individual’s physical, mental, spiritual or personal welfare.
Where ‘personal records’ contain mixed information HMRC can require only the information that does not relate to any individual’s welfare. This can be done by omitting the information that makes the document ‘personal records’. The welfare information can be covered up, or redacted, so that it cannot be seen.
Journalistic material
A person is not required to produce material acquired or created for the purposes of journalism. Material is journalistic material only if it is in the possession of a person who acquired or created it for the purposes of journalism, that is a journalist, or unsolicited material sent to a person with the intention of it being used for journalism.
Legally privileged information or documents (privileged data)
Whether data is or is not privileged and protected from the need to disclose is a complex issue, which will turn on the facts of the particular situation.
Legal privilege arises under common law and may only be overridden if this is expressly or necessarily implicitly set out in legislation. It protects a party's right to communicate in confidence with a legal adviser. There are two types of legal privilege under common law:
Tax advice
Communications from a tax adviser who is not a practising lawyer will not attract legal advice privilege. However, HMRC can require the tax advice information only if:
Failure to respond
Where a person fails to respond to an Information notice under Schedule 36 FA 2008 they may become liable to penalties, as determined by HMRC. In cases of extreme default the Upper Tribunal may also impose tax geared penalties.
Penalties in respect of information notices are as follows: