1st Contact offers a range of services to small businesses ranging from book keeping to VAT advice. With our extensive experience of working alongside local firms, we are very aware of the issues affecting business owners. With the current economic downturn affecting everyone, but especially smaller businesses, we are running a series of news stories to keep you up to date with the developments that you need to know about.
As of 1 April, Corporation Tax and Income Tax inspectors will have the same powers of entry as VAT officers. The move comes as part of ongoing changes being rolled out since the merger of Customs & Excise and the Inland Revenue. This means that HMRC inspectors will be able to enter business premises, including home offices, in order to inspect business premises, assets and records under one set of powers.
Powers of Entry were deemed necessary for Customs officers in view of the fact that they may have been dealing with criminals involved in drug smuggling and contraband - however critics believe that granting the same powers to inspectors investigating corporation tax or income tax is somewhat "over the top" and rather unnecessary. There are concerns that there are not enough safeguards in place to protect the taxpayer, for example it is unclear what grounds of appeal might be available against a proposed inspection. Inspectors will be able to visit with as little as 7 days notice - or in some exceptional cases not have to give any prior warning of an inspection - with unannounced visits having to be authorised by specially trained senior staff in a local tax office. Visits to private dwellings will not be allowed without permission.
Reasons that a visit may be deemed necessary might include checking that a tax return has been filled out correctly, ensuring that statutory record keeping requirements are being met, assessing whether tax has been under paid or over claimed, or suspicion of tax avoidance. Random checks may also take place as a form of deterrent to the tax paying population at large.
The new powers are being granted under Schedule 36 of The Finance Act 2008. The inspectors will not have the power to force entry, although there will be a standard penalty of £300 imposed if HMRC officers are not granted access. A further £60 will then be added to the standard penalty for each day that access is denied. There will be the possibility of appeal against these penalties.
If you are contacted by HMRC regarding a potential inspection it is essential that you seek professional guidance. Here at 1st Contact we can advise you in the case of an inspection, so please don't hesitate to call us.