HMRC visits: Our top tips
HMRC visits: Trouble in store?
Many businesses dread a visit from HMRC. There is always the worry that something may come out resulting in paying more tax but there is also an understandable sense of dread at the potential distruption it could cause in the run up to the visit, during the visit 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 letter. If the appointment is made by telephone, ask the officer to confirm in writing the details of the visit – not only date and time but the expected length of the visit. Ask for confirmation of who will be coming, what their roles are in the enquiry overall and exactly what records it any they want to see. Ask at the outset are there 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 only has the information requested in it. Of course it may not be possible to prepare in advance if HMRC don’t give warning of a visit.
There are generally two types of unannounced visits and you should clearly establish at the outset what is happening. The first 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 another time when you will have the records ready and will also have time to let your accountant know of the visit.
The second is where HMRC deliberately does not forewarn the business but simply turns up. In this case there will be a formal notice signed either by a Tribunal or An Authorised Officer of HMRC. This notice 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 but even then only if it is held that there was not a reasonable excuse for not permitting entry, perhaps because the trader wanted his accountant there? These visits are not random and our advice would be to seek professional advice before letting them in.
Be aware that the visiting Officers will initially ask the business owner. If he / she cannot be traced they can ask anyone who is in charge at the time. If no one is actually in charge at that moment they can simply enter the premises and leave the notice displayed in a prominent position. They need only be told “no” once and they should not enter.
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 to see any business records 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 that feels he has been mistreated will be far more inclined to dig his heels in to find something and also when negotiating penalties. Refreshments and warmth are expected.
If HMRC make any contact with you direct 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 please contact us on 020 8989 5147. You can also find out more details about Professional Fee Protection Cover at www.thp.co.uk/pfp
About Kirsty Demeza
With a portfolio that ranges from startups to companies with a £10 million turnover, Kirsty’s talent for working closely with her clients ensures her services remain in strong demand.
“The most rewarding part of my role is seeing clients succeed,” she says. “When you help a new business and watch it expand into new premises and secure big contracts, it’s a great feeling.” Kirsty never finds two days are the same.
As well as providing accounting services that range from self-assessment tax planning and VAT to audit and accounts, she’s part of THP’s sales team and closely involved in helping our trainees to develop their skills.