With HMRC checks on coronavirus business support ramping up and on the cards for the next six years, what are your rights and obligations if your business is singled out for a compliance check?
Need a reason?
HMRC has the right to enquire into any tax return, personal or business, to verify the figures and therefore the tax (and/or NI) liability. It doesn’t need to have a trigger, for example making a large VAT repayment claim when your turnover doesn’t substantiate it or where the amount of tax doesn’t appear to match other values submitted on the return, to initiate an enquiry. It might also be responding to a whistleblowing complaint; more than 26,000 such complaints have been received in respect of the Coronavirus Job Retention Scheme and HMRC must investigate every one. Equally, it will have received many complaints relating to non-payment of the national minimum wage over the last year, particularly once employees were flexi-furloughed, and these too must be investigated.
Making contact
Initial contact to open an enquiry will be by telephone or letter and you have the opportunity at that point to outline to HMRC why you think the compliance check is unnecessary. Do be aware though that HMRC is now conducting compliance checks via Microsoft Teams rather than face-to-face visits and it’s not clear if this may well be a permanent operating model going forward. If COVID-19 makes it difficult for you to handle a compliance check, for example you have very few staff attending the office, or you have absence or resource issues, let HMRC know. Don’t just ignore the compliance check request that you’ve received. HMRC will almost certainly extend any deadlines if you discuss your issues.
Call in the experts
If you use a payroll agent or tax advisor they will already be authorised to deal with HMRC on your behalf which will allow them to participate in the compliance check. You can also temporarily authorise an agent to assist you just with the compliance check and if they don’t already have formal authorisation you’ll need to apply for temporary authorisation via Form Comp1 (see Follow up ) which is sent to the HMRC officer who is dealing with the compliance check. This temporary authorisation will not override or interact in any way with any authority provided to the same, or any other, advisor in respect of your affairs.
What and where?
During the compliance check you may well be asked to supply a lot of data or documentation. HMRC may request it to be submitted by email or uploaded to Dropbox (HMRC’s preferred software solution for large files). If you, or your IT team, are concerned about the security of such communication channels given the sensitive and personal nature of the data that you’ll be submitting, you’re perfectly entitled to post information to HMRC, but of course this will be expensive, and you cannot recoup the cost. HMRC may well ask to visit your business premises, which includes your home if you run your business from there, to inspect documentation. If you think this is unreasonable you need to raise it.
Pro advice. It’s not a good idea to be obstructive just for the sake of it. HMRC can reduce or cancel penalties where taxpayers have co-operated during the check and that might turn out to be very important.
Pro advice. You can also ask a friend, relative or advisor from a voluntary organisation such as TaxAid (see Follow up ) to assist you with the compliance check but they also need to be authorised in the same way as a commercial advisor.
HMRC has the right to enquire into any tax return to verify the figures and therefore the tax (and/or NI) liability. It doesn’t need to have a trigger. If you need to call in a specialist advisor for the compliance check you must temporarily authorise them but that won’t change any authorisation you already have, for example in respect of your payroll agent.
The next step
Taxaid — Weblink
Tax agents and advisers: COMP1
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