Agent participation
So your client phones you and says that he has received a letter from HMRC saying that they are opening a compliance check to be started with a visit to the business premises. They will be considering all aspects of the business - direct tax, PAYE, VAT. The letter indicates that the business proprietor should be present throughout the time the HMRC officers are there to answer questions. Your client is worried what those questions might be and asks whether you should attend. What do you say?
It is a tricky question. If the visit is going to take a couple of days (which is possible if all the records are to be reviewed) most advisors will not want to be hanging around watching the process taking place. Your client may not be that happy to be paying for you to do this either! Of course, if the time could be used productively that is a different matter but that will rarely be possible.
My concern, however, is the extent to which HMRC officers will start asking questions which might verge on those that might be asked in a traditional opening meeting. Then the client might benefit from having their advisor present. We do have some experience of this from Employer Compliance visits. Mostly, the officers will want to ask questions about the record keeping and associated issued but occasionally those questions do start to move towards technical issues. The writer has had a number of cases where unguarded answers to questions have led to serious problems.
What is the view of the readers?
Keeping checks on the checkers
This “compliance check” is a full scale investigation into all the aspects of the business that have tax implications. The HMRC officers will need to ask the proprietor, or some suitable person, about the business records and how they are kept before they can even commence their checking process. This questioning will undoubtedly be extended to obtain further clarification, particularly if the HMRC officers perceive that there are inadequacies in the procedures being operated. As Nicola Ross Martin says, these visits will be well planned. I would expect that the HMRC officers will have detailed questionnaires and checklists to complete. Having obtained new powers HMRC will be very keen to demonstrate that at last they have the means to carry out enquiry work effectively (whereas I and many others would contend that the powers previously available to them were more than adequate and poor results were down to poor case selection by HMRC and HMRC dragging out investigations that should have been closed much sooner). In one respect dealing with a tax investigation has not changed and time invested at the beginning will pay dividends later. The HMRC officers will be well prepared and the client and the adviser must be better prepared. It could be expecting too much of the adviser to turn up with the HMRC officers and deal with any issues as and when they are thrown at him or her. Misunderstandings may arise and from past experience, it can be very difficult to prise off an HMRC officer who has grabbed the wrong end of the stick. Preparation in advance of the visit could be more important than the adviser being in attendance during the visit. In an ideal world I would recommend both.
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HMRC is still formulating its approach
I have been doing some research on this, which I will share.
We have not seen any full compliance checks on companies under the new regime yet, as the first pilot is only just starting in the S.West. HMRC is optimistic about visits being short and to the point. Statistically they know that aspect (focused) enquired net a better return.
We have though been seeing visits where HMRC is targetting specific businesses, these appear to be vets, hospital consultants, taxi firms and takeaways. These are the more scary ones for clients, as the are targetted and well planned, and so if your client gets a letter, make sure that you are there throughout the visit.