The Emotional Toll of an Enquiry – A Blog by Paul Aplin OBE

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Professional exams prepare you well for handling the technical aspects of tax enquiries. Practical skills are acquired through experience over many years. There is, however, generally little or no training for handling the psychological impact, yet this can be the most difficult aspect to deal with and the one that sticks in the mind long after the enquiry has ended. It is rarely, if ever, written about.

Some clients know they are at risk of enquiry, either because there is genuine doubt over the tax treatment of an item in their return or because they have withheld information from their adviser.  For most however, an enquiry is unexpected.

Where there is doubt over a tax treatment, the advisor will have fully disclosed the treatment adopted, prepared the client for the technical argument, HMRC’s likely position and the process that will be followed. Knowing what is to come helps the client to prepare for the uncertainty that may hang over them for months or even years. As time progresses, frustrations may surface but generally they can be managed.

When the enquiry is unexpected, its impact depends upon its nature and extent. A simple technical or factual query may be easily and swiftly dealt with.

A more detailed enquiry can extend over a significant time period and involve the production of specific documents or information. That information can – in a residence or domicile enquiry – extend to matters that the client regards as highly personal. Being asked to produce evidence of dates of travel, intention to settle, intention never to return and so forth can be difficult practically and intrusive personally. What may seem to the client a matter of privacy may to a tax inspector look like an attempt to conceal. That can lead to tensions between the inspector and the client which the advisor must endeavour to manage.

In my experience, much of the tension arises as the list of information required expands beyond the basics and on to more personal records or explanations. If the inspector feels that some questions have not been answered, then inevitably more will be asked. From the client’s perspective this can feel like a fishing expedition where the tool has changed from fly-rod to trawl-net. The client has, in their mind, become a victim of an unfair system. Frustration erupts into anger.

The Advisor’s Perspective

The advisor – acting for the client and in their best interests – must manage any tensions that arise. In a routine enquiry, that will normally be an easy matter, but if an enquiry drags on or the technical arguments begin to appear less strong, that can change. Persuading the client that these things take time becomes more difficult as time progresses. I can still remember enquiries from many years ago that were settled simply because the client had had enough of the stress and uncertainty, but which could have been concluded very differently if the client had been willing to continue.

Managing that kind of stress is a matter between the client and advisor. When the stress turns to anger it can involve the advisor having to keep that anger from the inspector or, if it erupts in a meeting, managing it. Professional exams do not prepare advisors for this; even decades of experience cannot always prepare you for it as every situation is different.

Preparation is often the deciding factor in successfully concluding an enquiry. If a tax treatment is uncertain the position will have been thought through very carefully, discussed with the client, fully disclosed to HMRC and the questions anticipated. Any necessary documentation will be in place.

The best evidence is contemporaneous: records kept in real-time and the reasoning for decisions recorded in, for example, board minutes or exchanges of correspondence. In a case where residence or domicile is a factor, keeping careful records over a period of years can massively reduce the stress of an enquiry if and when it comes (though it is important to know what to keep and to be disciplined in keeping it). This is where regular meetings between client and advisor really pay off:  delivering best advice requires an understanding of the client as a person, not just a set of facts.

Over the years, numerous clients have said to me – during or at the end of enquiries – “you are always so calm”. I always tried to be, because for me that is an essential part of being a professional.  Underneath the surface however, things were sometimes very different. Loss of sleep, constantly pondering potential outcomes, the feeling in the pit of the stomach when you think you have missed something fundamental (and the relief when you find that you haven’t), the strain of being the go between, worrying about the client’s wellbeing.

These stresses are not always manageable.

Balancing the technical, practical and psychological factors comes down to training, experience and judgement. It is an essential part of being a professional. But advisors and clients are human beings as well and stress can have a huge effect. I’m a firm advocate of being open with colleagues about stress levels and of advising clients to share their worries with close family. We all need someone watching over us at these times.

On the enquiry itself, as with so many things in life, planning and preparation can make a huge difference in minimising the stress involved. As a former colleague once said to me “time spent on preparation is rarely wasted”. He was right.

At Daysium, we understand how emotionally draining it can be to face an enquiry. Our goal has always been to reduce complexity and uncertainty. Tax compliance doesn’t have to be cumbersome, and record-keeping can be straightforward with a bit of help from automation.

We also agree with Paul on the value of open communication. Our platform helps log and gather supporting records and share ideas between clients and tax advisors. The reports clients can generate and share, if they choose to, can help tax advisors notice any issues in advance. Advisors can also help ensure day counting works for the client’s unique situation.

Tax advisors should take this opportunity to join our newly opened Partner Program to enhance their clients’ record-keeping and day-counting process. You’ll be part of an innovative network of tax experts from different countries.

While joining through a partner is the quickest way to get started, you can also sign up for our waitlist. We’ll begin onboarding people from the waitlist soon.