How to prepare your clients for HMRC enquiries

As a tax advisor, how can you and your client be better prepared for an enquiry? The answer lies in being proactive, developing great client relationships and having a secure, easy-to-use record-keeping system.

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HMRC Tax enquiries

Domicile - a brief recap

If you’re in tax, you’ll be familiar with domicile and the need for domicile record keeping. However, as domicile is relevant to income tax, capital gains tax, inheritance tax, and even the tax status of trusts, it’s worth recapping the basics.

An enquiry can be triggered by a number of events; ceasing to use the remittance basis of taxation, people who arrive in the UK for the first time, people who were formally UK domiciled and, unfortunately, if someone has passed away.

Helping you get through it

Whereas the first two questions are obvious to most clients, the third and fourth questions often come as a surprise. Why should I share how I live my life with tax authorities? Why does HMRC need to know how I spend my free time, the trips I make with my family, my investments or my future plans?

The realisation that your client needs to share very personal information often comes as a shock, followed by a question to you, the advisor: Can you help me get through this?

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Tax advisors helping their clients
What will HMRC seek to establish?

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Where your client is from

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Where your client is now

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How your client goes about living their life

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What your client's intentions were before the enquiry

Be prepared - overprepared

Today, HMRC enquiries are taking a more aggressive stand on domicile. Also, they’re tough to predict. Many events can trigger an enquiry, as we have touched on, yet they also happen without your client making sudden moves or changes to their lifestyle, which means you can’t always see them coming.

Because of the unpredictability of tax enquiries, the best way to go about domicile record-keeping as a tax advisor is to be prepared before they happen. 

If you start collecting documentation after an enquiry has been initiated, you’ll be under incredible time pressure to provide information that, if not contemporaneous, might raise more questions than it answers.

When documents and statements of intent are collated retrospectively during an enquiry, it raises the possibility that your client could be painting a picture to fit, further raising the investigator's suspicions. This drags out an enquiry - which can take years.

Building client relationships

Being prepared not only lies in collecting the requested information but also in preparing your client. Tax enquiries are intrusive, and telling your client upfront softens the blow.

This is why the job of tax advisors is all about client relationship management. You’re not just the person that manages taxes; you’re a trusted advisor that clients rely on. When HMRC comes knocking on your client’s door, you need to know what’s in your client’s mind and find a way to evidence that. 

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Domicile status
Communicating with HMRC

Being smart with technology

Since dealing with tax enquiries is all about client relationship management, we recommend using smart tools to take on the more repetitive, tedious tasks; you need a secure and straightforward system that helps clients collect information about their domicile status wherever they are.

To be 100% prepared and safe in your domicile record keeping, we recommend using Domicile Locker, a tool specially designed for tax advisors. 

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“For the client, there’s always the shock of the initial letter. 'Why did this happen?' 'How will this end?' It’s casting a shadow over everyday family life because enquiries get so personal.

When you don’t have anything to hide, it feels unfair to need to share so much personal information. In this story, tax advisors play the important role of guide, as they prepare clients for what’s coming.”

Alan Kennedy, Managing Director of Trident Tax

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“Many clients run away from the emotional discomfort of starting domicile record-keeping because the task seems so overwhelming.

You can fundamentally change this by using an extremely user-friendly tool that enables structured record-keeping. Only then can you reduce the fear and start building a file.” 

Tim Huelin, Co-founder of Taxteq


HubSpot Video

Domicile Locker by Taxteq

Domicile Locker refutes the allegation of ‘window dressing’ – suggesting that your client is concocting a story to fit now that their claimed non-dom status is being investigated. It answers the fundamental question of what was in someone’s mind and how they can evidence that.

Domicile Locker makes it easy for you and your client to be well-prepared ahead of time by compiling a body of evidence that will answer the investigator's questions. This means you can both go back to doing more of what technology can’t - being human.

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Domicile Record Keeping Webinar