The Inland Revenue want taxpayers to pay only the right amount of tax and we will do everything we can to ensure this happens. We aim to collect only the right amount of tax, with any interest and penalties that may be due.

Most taxpayers do pay what is due but, unfortunately, some do not take sufficient care over their affairs and others deliberately try to pay less than is due. When we think this may have happened, we have to investigate the matter to get at the facts.

We promise that we will carry out our investigations promptly and bring them to a close once we are satisfied that everything is in order.

This Code of Practice explains how we, the Special Compliance Office, carry out investigations (other than those where serious fraud is suspected at the outset) and your rights and responsibilities in particular situations. It promises that you will be treated fairly and courteously in accordance with the law and the terms of the Taxpayer's Charter .From April 1997 onwards, our investigation may include an enquiry into a Self Assessment tax return. We may deal with the entire tax return, or an aspect of it.

Where our involvement is limited to specific aspects of the tax return, a local Tax Office, or other specialist office, will deal with the rest of the tax return. Where this happens, our work will be co-ordinated. This Code only applies to our investigation.

Where serious fraud is suspected at the outset, or becomes apparent during our investigation, there will be differences in our approach. We publish a separate Code explaining about serious fraud (Code of Practice 9) and we will advise you as soon as we think it may apply.

General

We take over responsibility for some investigations started in local Tax Offices and in other parts of the Inland Revenue. We start some investigations ourselves.

Some investigations we take over may be enquiries into tax returns issued under Self Assessment.

We liaise with your local Tax Office to ensure that the day to day administration of your tax affairs continues properly. At the end of our investigation, your Tax Office assumes full responsibility for your affairs. We will make sure that your Tax Office is told what has happened and what decisions have been taken.

Confidentiality

We may have to ask other people or organisations for information relevant to our enquiries at any stage of the investigation. We will always do what we can to avoid someone else knowing that we want information in connection with a tax investigation, or embarrassing you in any way. However, it is not always possible to prevent them drawing their own conclusions.

We will only make third party enquiries if we feel it is necessary. When making third party enquiries, we will pay proper regard to your business and personal interests and to the need for confidentiality. If you have provided a mandate, that is, an authority for a third party (for example, your bank) to provide us with information, we may use it to facilitate our enquiries. In our experience, mandates can usually only be used to obtain information available to you personally. Sometimes we will need to use our legal powers whether or not you have given us a mandate.

You can refuse to discuss your personal tax affairs in front of other people, including your business partners, fellow directors, and your spouse. If there are matters you do not want discussed with others present, you should tell us. However, it will often speed up an investigation, and reduce costs all round, if we can discuss things openly.

Professional representation

You may change or stop using a professional adviser at any time.

We expect high standards from professional advisers. If there are delays or difficulties we will contact you and may deal with you direct. You should co-operate fully with your adviser.

You should make sure your professional adviser has all the facts. You will always be personally responsible for your own tax affairs and for the accuracy of all information supplied to us, even if you have a professional adviser.

Whether or not you are represented, you can ask us at any time to explain your rights or why we have taken a particular action or what you are obliged to do under the law, even if we have already told your adviser.

Opening the investigation

Once we think it necessary to investigate under this Code, we will tell you or your professional adviser in writing.

If, as part of our investigation, we make enquiries into a Self Assessment tax return we are not obliged to give reasons for making the enquiries. We may, however, identify particular areas on which the enquiries will focus.

In other circumstances we will normally tell you the reasons for starting the investigation unless, exceptionally, we consider that to do so would prejudice the investigation.

At a meeting or otherwise we will give you the chance to

• disclose and explain any apparent omission from your tax returns or accounts
• volunteer information about irregularities or matters under review.

This opportunity extends to all aspects of your taxation affairs whether they are covered by Self Assessment or not.

We will discuss with you a convenient time and place for any meeting.

If an offence has been committed we will always take into account, when calculating any penalty which may be due, whether you have been helpful and have freely and fully volunteered any information about income or gains which were omitted or understated. You should ensure that the answers you give us at meetings are correct to the best of your knowledge and belief.

We will make a written record of any meeting we have with you. We will provide you with a copy. You will be invited to agree or comment on the notes in writing, but are not required by law to do so. You have the right to tell us if the notes are not accurate and tell us about any matters with which you disagree.

We expect you to provide complete and accurate information relevant to your accounts and tax returns. It is your responsibility to do so. If you think that what you have told us is wrong, or you want to add anything, you should tell us as soon as possible. You should consider very carefully any points we have raised about your accounts or tax return and reply as fully and promptly as possible. You should ask your accountant or other financial adviser, if you have one, for advice.

During the investigation

During the investigation we may ask you to attend meetings. We may ask that these meetings take place at your offices, at a local Tax Office, at your business premises, or, exceptionally, at your private home. You can ask your adviser to attend any meeting we have with you. We may also want to see employees of yours or intermediaries who can provide us with information, for example, if you run a large business. A meeting at any of your premises will always be with discretion and with your prior permission.

Meetings allow you to clarify and explain any points you think we may not have understood and they allow us to ask questions as well.

You are not obliged to attend any meeting, but we invite your co-operation in this respect. We do expect you to provide the information which is essential to the investigation. Sometimes correspondence may not be an adequate substitute for a meeting, in which case we will make this clear to you. If you refuse to attend a meeting in such a case we may have to proceed more formally, for example, by asking the Appeal Commissioners to consider any unsettled appeals. We aim to avoid long and protracted correspondence which delays the completion of the investigation. It is often essential, however, to ask you to clarify points we may not understand fully.

We will ask only for the information we believe to be necessary because we know that some of what we ask for may be sensitive and personal.

We will deal promptly with letters from you or your adviser, normally within our 28 day target for replies. If we cannot do so, we will let you or your professional adviser know the reason for the delay.

You can help us complete our investigation quickly, and so reduce costs all round, if you or your adviser reply promptly and fully to our enquiries.

Self Assessment tax returns

At any time after you have sent us a tax return for tax purposes, including a self assessment, you should tell us at once about anything in it which is wrong, or which should have been in it but has been omitted.

You may amend your self assessment at any time up to 12 months following the filing date (the filing date is normally 31 January following the tax year to which the tax return relates).

You cannot make an amendment to your self assessment

• when the tax return is under enquiry, but you should still tell us at once about any changes and we will take these into account at the end of the investigation
• after 12 months following the filing date, but you should always tell us about any changes needed and we will then discuss with you how we can settle matters.

Under the rules which apply to Self Assessment tax returns, we normally have up to 12 months from the filing date for your tax return in which to tell you that we intend to start enquiries. We may have longer if you send in your tax return late. We will always have at least 12 months to enquire into any amendment that you make to your tax return. Even though your affairs may already be the subject of an investigation under this Code, we may, because of this time limit, have to tell you that we intend to enquire into your tax return before the 12 months expires. At the end of that period, if we have not begun enquiries, your tax return will normally become final. We can make an assessment after that period only if we discover an error which we could not reasonably have been expected to be aware of from the information provided in or with your tax return. In that case, we can make an assessment at any time up to 31 January five years following the end of the tax year. If we discover that your tax return was incorrect because of fraudulent or negligent conduct, we can make an assessment at any time up to 31 January twenty years after the end of the tax year.

The fact that your affairs are already the subject of an investigation under this Code does not release you from your responsibility to file complete and accurate tax returns as they become due. You should still file your tax return but a serious view will be taken if, when you do so, you know it to be wrong.

You may be unable to provide final figures because you think these might be affected in some way by the investigation which is underway. If so, include your best estimates in the tax return and indicate which figures may be affected by the outcome of the existing enquires.

Your costs

We will close our investigation as soon as we are satisfied that everything is in order, or is settled.

You can make representations to us on these matters. We will tell you why the investigation is to continue, unless to do so would prejudice our enquiries.

Keeping you informed

• we think we need a meeting with you
• we are making an assessment of your income or gains
• we consider your self assessment should be amended
• we are not satisfied with your explanations, whenever that is the case, and what you need to do to satisfy us
• we need to use our statutory powers to obtain information or documents, in accordance with the relevant statutory provisions.

You can ask us at any time to explain your rights or tell you why we have taken a particular action, or explain what you are obliged to do under the law.

You may ask for these explanations even if we have already given them to your professional adviser.

Providing information

We will give you a reasonable amount of time to provide any information we have requested unless, in exceptional circumstances, immediate production of the documents is necessary.

You should tell us if you think we have not given enough time to provide information and suggest another timescale. We will either agree the new timescale with you or explain when we do not think it is right to do so.

You should tell us if you have difficulty obtaining the information we have asked for and we will discuss with you how you might obtain it. You should also tell us if you think it is not relevant to the investigation. We will consider your reasons carefully. If we think we still need the information, we will tell you why.

You should respond promptly when we ask you for information. If you co-operate with us in our enquiries, it may limit any penalties you may have to pay.

You should tell us about any special features of your business or your financial affairs which you think might be relevant to the questions we are asking.

Where we need to use the legal powers Parliament has given us to obtain information, we will follow the statutory safeguards to ensure we are using them properly. When seeking permission to use these formal powers, we will make sure that any representations you have made and all relevant facts are put forward.

Records

We may ask to see your business records if we are investigating your business affairs.

We may ask to see records of private transactions, including bank and building society statements if we think they are relevant to our investigation. We may ask you to confirm in writing a statement of your assets and liabilities, bank, and other accounts operated.

You can ask us to examine your records at your premises, rather than send them to us. Sometimes we will ask you if we can take the records away (or take copies). Original records will be returned as quickly as possible. It will speed matters up if you can let us have access to your records very shortly after we ask to see them. You should tell us if you think your records are not adequate or are incorrect for any reason.

You may ask for the return of any records which we hold, if you need them at any time. If we have to keep them, we will give you copies of any documents you need. We will do this free of charge and we will agree a timetable for this.

We will advise you, where applicable, of what you need to do if your business or personal records did not meet the legal requirements, or if we consider that they were inadequate in any other way. If you remain in doubt about the records you need to keep for the future or the amount of detail required, you should ask your professional adviser or us for help.

Payments on account

Under Self Assessment rules, you must pay the tax due on time. If you do not, a surcharge may be levied. (A surcharge is a fixed percentage of any tax unpaid at a specific date.)

If we cannot reach agreement on the additional tax to be paid during the investigation, we may proceed formally. Where Self Assessment applies, we may make a provisional amendment to your self assessment before the end of our enquiries. We may do this if we think that additional tax is due and that it might not be paid if we did not act promptly. We may also, whether Self Assessment applies or not, make assessments for earlier years. You have a right to appeal against any such assessments or amendments and may ask us to postpone payment of any of the tax. If we cannot reach agreement, you may ask the Appeal Commissioners to decide how much tax you should pay at this stage of our investigation.

Self Assessment, assessments, determinations and appeals

If we cannot reach agreement with you, we may make an assessment or determination of any amounts we believe are due from you, on the basis of all the relevant information available to us at that time. This can include a determination of any interest, surcharge, or penalty.

Where a self assessment is under enquiry we will invite you, if you agree with our figures, to amend your self assessment. You will have 30 days to do so. If you do not do so within 30 days, we will amend your self assessment.

You have 30 days to appeal against any assessment, or amendment to your self assessment, made by us that you do not think is correct. You can also appeal against any surcharge within 30 days on the grounds that you had a reasonable excuse for not paying tax on time.

You can find out how to make an appeal by reading the notes issued with the amendment, assessment, or determination, by asking us to explain the process to you, or by asking us for leaflet IR37 'Appeals against tax', which tells you more about Appeals and the Commissioners.

Appeal hearings

Where our investigation includes an enquiry into a current Self Assessment tax return and you think we have no grounds for continuing our enquiry, you may ask the Appeal Commissioners to consider whether the enquiry should be closed. For example, you may believe that you have provided all the information reasonably required to determine the accuracy or completeness of the tax return, or that the enquiry is being prolonged unnecessarily by us.

If you have made an appeal against an assessment, you have the right to ask for any appeals to be heard by the Commissioners. We will arrange for this to be done or, if you prefer, you can approach the Commissioners direct.

Contact with the Appeal Commissioners should always be made through their Clerk and we will give you his name and address if you ask for it.

If the appeal hearing has been arranged at your request and we think we will need more time to conclude our enquiries, or it is otherwise not appropriate for your case to be heard, we will tell you and ask the Commissioners to adjourn the hearing to a later date. You will be entitled to attend and may oppose our request.

We may ask the Commissioners to hear your appeal if there is little or no progress being made towards settling it by agreement.

If the appeal hearing has been arranged at our request and you need more time to provide the information, you may ask the Commissioners to adjourn the hearing to a later date. It will be up to them to decide whether to do so.

We will tell you if we intend to ask the Commissioners to settle your appeal. We will explain the figures we propose to put forward at least 14 days before the date fixed for the hearing, unless there are exceptional circumstances. The figures we put forward may differ from those we suggested to you during our negotiations.

You have the right to put forward your case to the Commissioners and tell them the figures you believe to be correct.

You can choose whether or not to have your case presented for you by a professional representative, or by any other person, providing the Commissioners do not object. Matters that we need to put to the Commissioners under this Code can be complex and involve important issues. We advise you to be professionally represented at any hearing.

We have the right to put our case as well and will aim to ensure that the Commissioners have all the relevant facts about your tax affairs before them.

After listening to both parties and considering all the evidence, the Commissioners will decide whether the amendment or assessment should remain unchanged, be increased or reduced.

You may ask us, or if you prefer the Clerk to the Commissioners, if there is anything about the appeal hearing procedure which you do not understand or feel you need to know.

Interest, surcharge, and penalties

In respect of assessments not covered by the Self Assessment rules, interest and penalties may apply (and from 6 April 1998, for income tax and capital gains tax, so may a surcharge).

The way we work out penalties is set out in our leaflet IR 73 'Investigations. How settlements are negotiated'. (For employers' and contractors'  liabilities we also have leaflet IR 109 'Employer compliance reviews and negotiations'.) We will supply copies on request.

You should tell us all the matters you think are relevant when we are working out what penalty we believe is due. Each case is carefully considered on its merits.

The conclusion of the investigation

Where our investigation has shown that something was wrong, we will discuss the findings with you.

You will be told why we are not satisfied with any figures or explanations provided by you and we will try to agree with you any adjustments needed.

We will only suggest adjustments that we consider to be reasonable in the light of the information we have. You should ask us to explain if you do not understand any figures we are putting forward.

Usually we will seek a meeting with you and your professional adviser to discuss settlement of your affairs.

Where there have been errors or omissions in your accounts or tax returns, we will ask you to sign a Certificate of Full Disclosure confirming that you have now declared all your taxable income or gains. We will not ask for a certificate if the investigation showed nothing was wrong.

We will take a very serious view if you sign a Certificate of Full Disclosure you know to be false, so you should consider it carefully before signing.

You should always make sure that you understand what, if anything, was wrong with your accounts or tax returns. You should ask us, or your professional adviser, what you need to do to make sure you get them right in the future.

We will not start another investigation in the future simply because something was wrong on a previous occasion, but we may want to check that you have made the necessary changes to put things right. However, if you do something seriously wrong again you could leave yourself open to criminal charges.

False statements

If you make a statement you know to be false you may be prosecuted.

Suggestions

Inland Revenue Special Compliance Office
Angel Court
199 Borough High Street
LONDON SE1 1HZ.

Complaints

• we have not followed our Code of Practice
• you have been denied your rights in some respect
• we have made a mistake
• you have been treated badly in some other way during the investigation

you can ask for your case to be reviewed by the person in charge of the Special Compliance Office where the investigation was carried out. We will give you the name of the person to contact.

If you are still not satisfied you can ask the Controller, the person who has overall responsibility for Special Compliance Office, to examine your complaint. Our leaflet IR120 'You and the Inland Revenue' tells you how to do that. We will give you the Controller's name and address if you ask for it.

If the Controller does not settle your complaint to your satisfaction, you can ask the Adjudicator to look into it and recommend appropriate action. The Adjudicator, whose services are free, is an impartial referee whose recommendations are independent. The address is

The Adjudicator's Office
Haymarket House
28 Haymarket
London SW1Y 4SP.

Telephone: 0171 930 2292
Fax: 0171 930 2298.

Finally, you can ask a Member of Parliament to refer a complaint to the independent Parliamentary Commissioner for Administration commonly known as the 'Ombudsman', whose address is

Church House
Great Smith Street
London SW1P 3BW.

Telephone: 0171 276 2130.

The Taxpayer's Charter

To be fair

• By settling your tax affairs impartially
• By expecting you to pay only what is due under the law
• By treating everyone with equal fairness

To help you

• To get your tax affairs right
• To understand your rights and obligations
• By providing clear leaflets and forms
• By giving you information and assistance at our enquiry offices
• By being courteous at all times

To provide an efficient service

• By settling your tax affairs promptly and accurately
• By keeping your private affairs strictly confidential
• By using the information you give us only as allowed by the law
• By keeping to a minimum your costs of complying with the law
• By keeping our costs down

To be accountable for what we do

• By setting standards for ourselves and publishing how well we live up to them

If you are not satisfied

• We will tell you exactly how to complain
• You can ask for your tax affairs to be looked at again
• You can appeal to an independent tribunal
• Your MP can refer your complaint to the Ombudsman

In return, we need you

• To be honest
• To give us accurate information
• To pay your tax on time