When I started in the profession 20 years ago, things were very different.
A letter was received suggesting all is not as it might be with a set of accounts.
The senior manager in the office would call the inspector at the local office and talk it over.
The matter would probably be resolved by discussion and compromise based on mutual respect between two professionals familiar with each others methods.
Things are very different now.
You or your accountant will rarely hear from anyone you are familiar with.
Perhaps not even an office in the same part of the country.
The old bank manger type who grew old tending to his "customers", basing his decisions and choices for enquiry on instinct and experience has long gone.
The new Revenue & Customs have modernized the service and fresh young incentivized individuals are target driven and expected to get results by fair means or fowl.
A lengthy full enquiry can close a business down if you get the wrong result.
If the stress doesn't get you the lost time and the eventual bill from HM Revenue & Customs and your accountant might.
Here are just a few of the areas and changes you should be aware of: Penalties: The old penalty system was very easy to negotiate.
The client had to be guilty of blatant tax fraud, a complete failure to cooperate, withholding and tampering with documents and generally "asking for it" Only then would an inspector seek to add a significant penalty, say 30%.
We can now expect 30% as a starting point for a prompted, innocent mistake.
The tax office have finally realized that a clever accountant can mitigate the costs with intelligent argument and insisting on black and white proof of any suggestion of misdeclarations.
Not always an easy task for the average inspector.
Far easier for the Revenue to establish proof of a few apparently minor mistakes exaggerate the effect, tax it and assume the error has occurred repeatedly for years.
If the client doesn't object double the liability by attempting to charge a 100% penalty.
If you think that's an extreme example, it may be, but it is by no means unheard of.
Remember: Penalties are negotiable.
A penalty proposal is just that, it's open to negotiation.
Don't be afraid to seek a reduction but you need to approach it in the correct manner.
Mitigation is possible by, Telling -Helping- Giving Basically, cooperate and disclose anything you "forgot about" or own up at an early stage.
This doesn't mean rolling over and agreeing everything an inspector might suggest.
It does mean revealing anything relevant early on in the enquiry, avoiding any misunderstandings and providing as much information as possible to support your arguments.
The Revenue has an obligation to share.
Just as the taxpayer should cooperate the inspector cannot fish for reasons to continue or extend an enquiry.
Your agent should be narrowing the scope of the enquiry early on.
He must share his information but you must ask him to do so.
Unannounced visits by Revenue Staff: You may not have heard but the Revenue now has the power to call unannounced at your premises and present a notice of inspection.
It is not a warrant and you or your manager/staff can refuse entry by saying No! The maximum penalty for refusal is £300.
No big deal.
Announced visits, when you can prepare in advance for a scheduled defined examination are statistically very much cheaper for the tax payer.
That is not to say documents etc may be hidden, it simply prevents inspectors fishing around outside their original scope of enquiry.
Also you or your agent should be asking whether or not a visit to premises, particularly your home, is reasonably required.
To visit your home, on the premise that it is your designated office is usually an excuse to assess your net worth.
They are casing the joint.
Are your declared profits enough to pay for the standard of living you are enjoying? But, if your office at home is a desk and chair refuse the visit.
You have the right.
They may ask to see statutory records.
What's that? Business records only? Maybe If, like many owner mangers of small businesses you mix your personal and business transactions in a variety of personal and business bank and credit cards, all of your accounts even joint accounts, are fair game.
Split the business accounts from your personal financial accounts.
Do you want to be explaining how you paid for the holiday spending money in Barbados two years ago because he saw a travel agents bill on your personal credit card? He can ask for it if you pay for the diesel in you van through that card.
The Selection process The local tax office now has no say in whom or why a taxpayer or business is selected for full or selective enquiry.
A remote office in Wales called the RIS (Risk & Intelligence Service) now has full discretion on such decisions based on statistical, computer based criteria and intelligence gathering.
For example, if you habitually file tax returns late or submit provisional data you are 20x more likely to be selected for enquiry.
Keep up to date and under the radar.
The Revenue is moving into a more industrialized approach to what has always been an adversarial system.
There will be less enquiries overall but the tax take is expected to rise substantially.
The current state of the public finances demands it.
The approach from the Revenue is likely to be more aggressive and detailed.
There is every chance that what used to be a simple exchange of correspondence and documentation will develop into a battle and any agent who advises clients in this area needs to be aware of the new regime and how to handle it.
It's not all bad news There are new provisions in the legislation that assist the agent or tax payer who has taken the trouble to make themselves aware.

• The right to an independent objective review.
  This can close an enquiry where there is deadlock and the inspector is struggling to get something out of a poor position.
  Again you must ask for it, at the right time.
  
• Prevention is better than cure.
  Have your records and procedures reviewed with specific attention to risky areas.
  Failure to balance cashbooks, company vans & cars not declared for staff use, receipts for expenses not being retained, mixing business and personal finances, mileage logs not maintained.
  All these areas and many other common problems are soft targets.
  
• The litigation and Settlements Strategy.
  A very useful Revenue publication issued in July 2007 included the statement from the then head of the Revenue on the enquiry strategy:

"The aim of HMRC's litigation and settlement strategy is to make sure we conduct disputes in a way that is professional, effective and that supports our objectives to close the tax gap and provide customers (taxpayers) with a clear understanding of the law.
" In effect if an enquiry is dragging on and the potential tax take is minimal you have the right to quote this statement and ask if the time and resources spent is proportionate, given the billions of tax per year it is estimated is lost through fraud and the black market.
Other areas of this publication give excellent ammunition to suggest an enquiry is either closed down or concluded with a quick settlement.