Revenue letters cause unnecessary worry

The Inland Revenue has received more criticism for causing anxiety and confusion by sending letters to thousands of self-employed people suggesting that they may have claimed expenses they were not entitled to.

In July, UKTECH ran an article (Revenue accused of scare tactics letter) which explained that the Revenue has sent some self-employed people what has been described as an 'enabling letter' relating to tax returns they have submitted.

It includes the phrase:

"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. We want to help you get this aspect right first time, which may avoid the need for an enquiry. I am therefore enclosing some ‘Questions and Answers’ which aim to help you with that part of the return."

However it did not specify which aspect might need 'particular attention' and was thought by some to be merely a 'fishing exercise'.

The Telegraph has now reported that some accountants believe that the letters, sent to people earning between £15,000 and £150,000 a year, could lead people to think they are about to be investigated.

It says that the letters have been sent to people who appear to be claiming more in expenses, compared with their overall turnover, than others in the same profession, but most recipients will not have made any error at all.

Peter Goodman, head of tax at accountancy firm Wilkins Kennedy, told the Telegraph: "Getting one of these letters may cause unnecessary worry for taxpayers. Many people may assume they are about to be investigated.

"The letter is vague. It's like saying to taxpayers: 'There may be something wrong with your tax return, but we are not going to tell you what it is.' If the Revenue is concerned, then the proper approach is for an enquiry to be raised under the self-assessment legislation in the proper way.

"The vast majority of taxpayers who receive one of these letters will have filed their tax return correctly and paid the right amount of tax. This approach may hinder good relations in the future."

Full article: Revenue letters 'worry taxpayers' - Telegraph