Can HMRC insist on seeing Purchase Invoices during a PAYE compliance visit ?

Can HMRC insist on seeing Purchase Invoices...

Didn't find your answer?

It is quite normal for the PAYE Compliance officer to ask for access to a sample of Purchase Invoices during a compliance visit. However, are HMRC entitled to see these records as they are nothing to do with the employment records they are inspecting.A client has resisted access on these grounds whilst being willing to provide specific purchase invoices for any items requested. HMRC argue that they need to see purchase invoices to check for items paid privately for directors, or "self employed" invoices. The clients view is that HMRC are on a fishing expedition, and that this is not a full investigation, only a PAYE compliance visit. What are readers experiences in resisting these claims ?
Michael Bell

Replies (2)

Please login or register to join the discussion.

avatar
By refs8
15th Nov 2005 13:11

TAX
I think not - had a similiar situation and asked the inspector what 'relevance' it had and he kept asking the same question and I kept giving the asking the same answer about relavance but was carefully to say that this was not non cooperation but felt this was not what the visit was about - be tough and choice your words carefully, but still keep the coffee coming !! He gave up in the end and we heard no more - in other words he was 'fishing'!!

Thanks (0)
avatar
By Elenderil
15th Nov 2005 10:27

Rights to see records.
It is common for Employer Compliance Officers to be used to obtain information on behalf of the CT Inspector, so your client may well be correct in his suspicions. The Compliance Officer has a greater right to see records than the CT Inspector. The view held by HMRC has always been that they have the right to see any records or documents that may have an impact in the calculation of PAYE or NIC liabilities of the employees.

Regulation 97 of the 2003 PAYE regs states that "where required to do so...........an employer must produce................all PAYE records as may be specified" The regulation goes on to define PAYE records as including "other documents and records relating to.........relevant payments to employees".

Reg 26 Sch 4 of the 2001 NIC regulations creates a similar right to see records relating to NIC. Given that any purchases of non cash items that have been used to supply a benefit in kind will create a Class 1A NIC position it seems harder to side step these regs than the PAYE ones.

I have never personally come across a case of an employer refusing to produce records during a compliance review. However, HMRC's Employer Compliance Manual suggests that action could be taken via the Commisioners by use of a regulation 80 determination for PAYE, or by imposing penalties under s98 for failuer to supply records when served with a notice to do so. It's clear that these are tactics of last resort however.

I would expect that HMRC would treat refusal to supply the documents as indicating that evidence of "wrong doing" was contained within them. That will probably be an invitation for all sorts of further complications such as VAT visits, and probably an accounts investigation. If you have a suspician that the client is witholding information that is evidence of tax evasion then you need to consider if you have a reporting obligation under the money laundering regs too.

Thanks (0)