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What to do if HMRC wants to visit your business

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26th Mar 2013
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Even for the most organised businesses, getting that fabled knock on the door from the tax inspector can induce palpitations. Venntax's Chris Chadburn offers advice on how to cope.

With the tax department reviving its programme of business record checks in November 2012, there’s an increasing chance of a visit from the tax inspector for businesses in the high risk category. The cross-tax checks are part of a widening of HMRC's powers -- now four years old -- to gather information from taxpayers and inspect business premises.

Tax specialist Venntax has produced a whitepaper for explaining what inspectors are entitled to ask for, what penalties to expect for non-compliance and how to ensure they don’t encroach on your rights.

Information powers

HMRC will firstly make informal requests for documents and other information; failure to provide them within an acceptable timeframe equals a formal notice from the officer, requiring the information.

According to Chadburn, quoting legislation, the information must be “reasonably required for the purpose of checking the taxpayer’s position”, relating to any UK tax and most foreign taxes, including current, past and future tax liabilities.

You can’t appeal against a requirement covering information that forms part of the businesses’ statutory records.

There is a similar power for getting information from third parties, but only if the taxpayer agrees or where a tax tribunal has given its approval.

Inspection powers

HMRC has the power to enter a person’s businesses premises and inspect the premises, assets and documents.

As a business owner, you have the right to refuse the HMRC officer entry or to ask them to leave your premises. This may result in little more than a loss of some goodwill, but if the visit was approved by a tax tribunal a modest penalty may arise.

The inspection must be reasonably required for the purpose of checking that person’s tax and carried out at an agreed time or with seven days’ notice or on the approval of an authorised officer.

Penalties

Failure to comply with an information notice or the deliberate obstruction of an officer during a visit can result in a fixed penalty of £300 and up to £60 for each day the offence continues.

Taxpayers should also be aware that investigators may ask questions about periods where the tax position can’t be changed as time limits have expired. In this case, officers should only be reviewing matters where HMRC has good reason to believe that time limits may be extended, said Chadburn.

Other tips and advice include:

  • Have someone around to help the inspecting officer to understand the record system. However, the officer has no power to question directors or staff
  • Unannounced inspection may take place if appointments have been broken or HMRC was unable to contact the taxpayer. 
  • Never forget HMRC officers will be asking questions for a reason. They may be unreasonable or aggressive in their requests and approach but a clear knowledge of the limits of their powers and a firm stance will get results.

For a more comprehensive run-down on your rights during an HMRC business record check, download the Venntax whitepaper, What to do when HMRC visit your business premises: Expert advice.

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Replies (2)

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By Trevor Scott
26th Mar 2013 19:41

Was this written by an Ex- tax Inspector?

Since when was it true that ….“You can’t appeal against a requirement covering information that forms part of the businesses’ statutory records.”

Upon what legal basis is that claim made?

“There is a similar power for getting information from third parties, but only if the taxpayer agrees or where a tax tribunal has given its approval.”

Such a claim makes it look like any third party can be required to comply? Under what legal basis can this happen?

 

My advice would be to avoid answering any question, politely referring all enquiries to your accountant; allowing he/she to do their job.

 

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By Trevor Scott
30th Mar 2013 22:49

Since I haven't had an answer from the author...

....I'll assume that it is recognised that taxpayers can appeal against a request for statutory business records, also that HMRC are very limited as to who they can order to supply information. The sweeping, fundamentally incorrect, generalisations of most tax inspectors is apparent in the article. Most unhelpful.

Even if it were a more serious case, a court, under CPR would have limited legal authority to order a variety of people to supply information.

 

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