Many businesses dread a visit from HMRC. There is always the worry that something may come out that results in you paying more tax but there is also an understandable sense of dread at the potential disruption 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 if any they want to see. Ask at the outset if there any particular risk areas they have identified in selecting you for an inspection. Make sure you have all of the requested records ready for the visit.
If the HMRC officer is to be left in a room, make sure it is clean and has only the information requested in it. Of course it may not be possible to prepare in advance if HMRC doesn’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 to be 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 the moment they can simply enter the premises and leave the notice displayed in a prominent place. They need only be told “No” once, and they should not enter.
Know your rights
HMRC does not have an 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 record that is reasonably required to check your tax affairs. If there is any uncertainty about 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 before the visit, and it 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 who 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 makes 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, contact me.