Changes to HMRC Investigations from 1 April 2009

2nd April 2009

With the aim of keeping you abrest of all HMRC legislation changes that may affect you, we would like to bring the following to your attention.

The way HMRC carries out compliance checks, also known as enquiries, visits and inspections, will change from 1 April 2009. The new compliance checks legislation is designed to make the tax system simpler and more consistent between different taxes.

Under the terms of the Finance Act 2008, the new laws will give HMRC the right to visit businesses in order to inspect premises, assets and records, and to ask taxpayers and third parties for more information and documents.

The new legislation provides HMRC with:

One set of powers to inspect business records, assets and premises
The ability to see statutory business records without a right of appeal
The ability to look at records for PAYE, Income Tax, the Construction Industry Scheme, Capital Gains Tax and Corporation Tax during the tax year before a return has been submitted

The legislation also makes some changes to the way HMRC must carry out compliance checks, including:

A new statutory ban on inspecting purely private dwellings without consent
A statutory requirement for HMRC to give at least seven days prior notice of a visit, unless either an unannounced visit is necessary, or a shorter period is agreed
A new requirement that unannounced visits must be approved beforehand by a specially trained HMRC officer
A statutory requirement on HMRC to act reasonably, although how 'reasonably' is determined will be interesting

In general terms, HMRC will make compliance checks for three reasons:

1. To ensure a specific tax return or claim is correct
2. To check that any payments are being made and reported correctly
3. To discourage evasion and make sure the tax system is operating fairly, some checks are made on a random basis

In most cases, starting a compliance check does not necessarily mean that HMRC believes there are serious problems, many are routine. If the check shows that there is nothing wrong, HMRC will bring it quickly to an end. If any tax has been overpaid, it will be repaid with interest. Any tax underpaid will be charged with interest. You can appeal any assessment or amendment if you believe you have grounds to do so.

Should you ever be investigated, as your accountants, we would be happy to assist you in any way possible and we would encourage you to contact us immediately to discuss your circumstances.

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