Business Records Check

What if HMRC want to visit your premises

Within HMRC the tax department has decided to revive 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 where their connect system is part of a widening of HMRC’s powers — now four years old — to gather information from taxpayers and inspect business premises.

How it will start

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

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.

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.

It is in the businesses interest to have this cleared up as soon as possible and therefore assisting the inspectors may move this along.

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,

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.
• You could decide to have your accountant present at the inspection to answer any questions the inspectors may ask.

Now if you are registered for VAT and over the VAT threshold of £85,000 you will need keep your records digitally, so this help you comply with the business records checks. One way to store these is in management document system which would require you to scan these into the software and then filed away in their where you choose, and you can det this up depending on your business.

If you keep bank statements, purchase and sales invoices of in printed format beware they may fade over time and be hard to read so keeping PDF copies of these makes sense as banks may charge for supplying bank statements from over 3 year old where they disappear from online banking search criteria. 

Fuel receipts or other till receipts are normally the first to fade so it is important to make every effort to keep these in PDF format and sometimes they offer to email the receipt to you which will keep electronically in other format it does not have to be in PDF format such as a Jpeg., PNG file.

Other such documents you may want to keep in PDF, Jpeg copies of are Payroll Reports, minutes of board meetings, team meetings, training records, one to reviews but dur to sensitivity of these reports I would suggest you restrict access to these either by access rights of your computer system or password protected.

If you would like any more information or a call on this please get in touch