Last year HMRC significantly changed the way it can check the accuracy of taxpayer's affairs. More recently additional taxes and levys have been included under this regime. HMRC can now carry out authorised investigations, called Compliance Checks, across these taxes:
From 1 April 2009
- Capital Gains Tax
- Construction Industry Scheme
- Corporation Tax
- Income Tax
- PAYE
- VAT
From 1 April 2010
- Aggregates Levy
- Climate Change Tax
- Inheritance Tax
- Insurance Premium Tax
- Landfill Tax
- Petroleum Revenue Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax
Although HMRC will contact a certain percentage of taxpayers for enquiry through random selection, most will be targetedwhere HMRC believe they have identified a potential failing.
You will be notified when HMRC are starting a Compliance Check but they may not inform your adviser so it is important that you do so immediately. HMRC will have the power to visit your business premises and they should give you at least 7 days notice but they can make unannounced visits if they believe it to be appropriate. They will not have the right to enter your home unless this is where you operate your business and then will be restricted to the areas used for business purposes.
We would advise that whether during a visit to your business premises or over the telephone you are careful with verbal replies and , if possible, have your adviser present.
If the Compliance Check shows that nothing is wrong HMRC will bring the matter quickly to an end. If HMRC discover a failure you should cooperate as quickly and efficiently as possible as this could reduce any resulting penalty.
The penalty be as much as 100% of the tax, VAT or duty you did not pay as a result of the failure. The penalty charged will depend on the offence, whether disclosure was prompted or unprompted and the quality of the actual disclosure. No penalty is charged at all if you have exercised reasonable care, however, HMRC have not defined what it considers to be reasonable care and acknowledge that it will differ from taxpayer to taxpayer.
Any business or individual subject to a HMRC Compliance Check should obtain qualified professional help immediately. In most cases your regular accountant will be happy to deal with this for you but if you or your accountant believes you would benefit from additional support we would be happy to help.
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