The HMRC can come knocking on your door about any of the following government taxes: personal income tax and corporation tax, capital taxes (such as capital gains tax and inheritance tax), value added tax (VAT), excise duties and stamp duty land tax, environmental taxes such as Air Passenger Duty and the climate change levy, National Insurance contributions, child benefit and some other forms of state support including the Child Trust Fund, payments of Tax Credits and so on.
The list is extensive, so the chance of you having a meeting with the tax authorities at some point in your life is reasonably high. The more money involved, the more likely it becomes.
HMRC have two main targets they work to:
- Improving the extent to which individuals and businesses pay the tax due and receive the credits and payments to which they are entitled;
- Improve customers experiences of HMRC and improve the UK business environment
The jury is out on how well they achieve either of these things!
So what should you expect from a visit?
In most cases they will make contact before a visit to inform you that they are coming. This is normally by phone or a letter explaining when they would like to come, what tax, duty or credit they wish to look at and what records or information they require from you.
However they can turn up unannounced to look at VAT or duty records.
Apart from special cases, the tax man will come to look at one tax issue per visit, be it VAT or income tax. It is rare that they will look at multiple taxes during one visit. However, if whilst looking into a particular tax area e.g VAT they discover information about another e.g NI, they will pass the information on to the relevant person(s).
Usually they request standard financial records such as your year end accounts under review, along with supporting documentation such as invoices, purchase receipts, VAT returns and bank statements. If there is a specific issue they wish to look at, for example the value of a property, they will outline specific things they would like to view such as a recent valuation or the sales documents. Either way you can query the list if you are unsure about anything on it.
The tax officer can request any information that they feel is relevant to the area they are looking at. You can ask them to explain the relevance if it is unclear. If you disagree the inspector can use formal powers to obtain the information as long as they can show that it is relevant to their investigation/ review.
If you have a disagreement with the officer you can contact the officers manager – they will have contact details on them and should provide them to you upon request.
If you are really unhappy with their conduct you can also log a complaint.
Their skills and resources include the full range of intrusive and covert surveillance; HMRC officers have a wide range of powers of arrest, entry, search and detention. Their main power is to detain anyone who has committed, or whom the officer has reasonable grounds to suspect has committed, any offence under the Customs and Excise Acts.
If you have an accountant, then ask them to take the burden off you by dealing with HMRC on your behalf. They are used to dealing with the tax authorities and will know where the line is when it comes to giving information and standing your ground. If they do find anything adverse, your accountant will be the best person to argue your case and try and minimise any claim they may try to raise. Oh and dont get flustered; a lot of people take the visits as some sort of personal attack. Sometimes the questions seem personal and accusing but try to remember the inspector is just doing his or her job. They ask the same questions to different people every day.
Common Mistakes to avoid
The most common mistake is people forgetting to include/account for all of their income in their tax returns. This could be a flat you rent out, income from cash in-hand work, employee benefits such as a parking space in London or use of a phone or car. When you are completing your tax returns have a good think about all of your income sources and any employee benefits you have.
For further information/advice about any of the above please get in touch with us on 01932 830664 (Weybridge office) or visit www.wardwilliams.co.uk
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