Many businesses dread a visit from HMRC; there is always the worry that something may arise, which results in paying more tax. There is also an understandable sense of dread at the potential disruption it could cause in the run up to, during and even following the visit. However, there are a number of things you can do to make the experience far less stressful.
Most HMRC visits are pre arranged, either by telephone or by letter. If the appointment is made by telephone, ask the officer to confirm in writing the details of the visit including the date, time and the expected length of the visit. Also ask for confirmation of who will be attending, what office they are from, what their roles are in the enquiry overall and exactly what records, if any, they want to see. Lastly, ask at the outset if there are any particular risk areas they have identified in selecting you for an inspection. Have all of the requested records ready for the visit.
If they are to be left in a room, make sure it is clean and that it only has the information they have requested in it. Of course, it may not be possible to prepare in advance if HMRC don’t give you any warning prior to their visit.
There are generally two types of unannounced visit and you should clearly establish at the outset what is happening. The first type of visit is generally where a routine inspection is being carried out but there has simply been a failure, somewhere along the line, to notify the trader. You may simply ask HMRC to come back at another time when you will have the records ready, which will also give you enough time to inform your accountant of the visit.
The second type of visit is where HMRC deliberately does not forewarn the business but simply turns up. In this case, they will have a formal notice signed either by a tribunal or an authorised officer of HMRC, which is actually a request to enter the premises. It does not give HMRC automatic rights of entry. There is no penalty for refusing entry for a notice signed by the authorised officer. There could be an initial penalty of £300, if the notice has been signed by a tribunal. However, this would only be applicable if there was no reasonable excuse for not permitting entry; for example, if the trader wanted his accountant to be present. These visits are not random and our advice would be to seek professional advice before giving them access to your premises.
Be aware that the visiting officers will initially ask to speak with the business owner; if they cannot be traced, the officers can ask to speak with anyone who is in charge at the time. If no one is actually in charge at the time, they may simply enter the premises and leave the notice displayed in a prominent place.
Know Your Rights
HMRC does not have any absolute right to meet the business owner; both announced and unannounced visits are inspections, not searches. They have the right to ask for any business record, which is reasonably required to check your tax affairs. If there is any uncertainty over whether an item is reasonably required, HMRC should be challenged instantly rather than afterwards. Also, the extent of the inspection should have been made clear prior to the visit and this should not be extended without justification.
You do not even need to have the inspection at your business premises if it would be better/more convenient to have it at the accountant’s office; their attendance at your premises must still be reasonably required in preference to elsewhere. HMRC must be courteous and polite to you at all times and explain what they need to see and why.
HMRC Officers are human beings and have the same right to courtesy as the rest of us. An Inspector who feels that he has been mistreated will be far more inclined to dig his heels in to find something or to take a harsher approach negotiating penalties. Refreshments and warmth are expected.
If HMRC make any contact with you directly, you should always let your accountant know who called and what they said. Let your accountant decide if they need to get involved. Always let your advisor know the outcome of the visit. It is good practice to ask HMRC to issue any follow up in writing.
If you are not currently protected against the professional costs incurred when you have a tax investigation or enquiry, get in touch to find out more about Armstrong Watson's tax investigation service.
Graham Poles, Partner
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