However, if no steps are taken to segregate income, capital and gains in overseas multi-currency portfolios and bank accounts, an HMRC enquiry may cause individuals to have to analyse years of data which, at best, is a difficult and time consuming task and, at worst, will be impossible leading to much higher tax liabilities.

Problems also arise where wealthy individuals have sought advice, but due to the ever-changing tax landscape fail to realise that the advice has become out of date.

HMRC expects taxpayers to regularly review the advice obtained to make sure it is up to date.

The dilemma for taxpayers is how to stay compliant while minimising professional fees.

HMRC is not necessarily concerned with the costs of advice and has recently taken the view that the failure to seek regular advice can be considered deliberately careless.

This serves as a stark reminder that HMRC appears to be blurring the lines between careless and deliberate behaviour.

HMRC’s discovery powers very much depend on the reasons for the tax not being paid on time.

Was the error the fault of the taxpayer or were there other factors that led to the liability?

The goal of most enquiries is to check that everything is in order.

But if there has been a mistake, HMRC will want to confirm what years are affected and recover any unpaid tax.

Where this situation arises, the strategy should be to show that this refers to a particular issue or a limited period of time.

Every client has different requirements and it is important that an individual approach is adopted.

It may be preferable to accept a tax liability to achieve closure.

Alternatively, HMRC’s approach may be thought unpalatable and referral to the tax tribunal for an independent ruling a better option.

John Hood is a tax partner with Moore Kingston Smith