HMRC carry out compliance checks into business records, returns or other documents to make sure that the right amount of tax is being paid at the right time.
What happens during a compliance check
HMRC will always tell you what they are checking and if they find that they need to extend the scope of the check, they will tell you.
HMRC will ask you for any information or documents that they may need during the check. In some cases they will ask to visit your business premises, if you have any.
The benefits of helping HMRC with a check
Helping HMRC with their check can have benefits for you. It will enable HMRC to complete the check as quickly as possible and reduce any inconvenience that it may cause you.
HMRC may not find anything wrong. But if there is something wrong, helping them with their check will also reduce the amount of any penalty they may charge.
If they do find something wrong, HMRC will tell you about any additional tax and ‘late payment’ interest that is due, and about any penalty that may be due.
You can reduce the amount of any penalty by giving HMRC assistance throughout their check. HMRC call this assistance the ‘quality of disclosure’, they measure this by considering:
- how much you tell HMRC about what is wrong
- how much help you give HMRC to work out what is wrong
- how much access you give HMRC to your records.
What happens at the end of a check
HMRC will finish their check by either sending you one or more ‘decision notices’ or by agreeing a contract settlement with you.
A decision notice can be any one of the following:
- an assessment or amendment to an assessment
- a penalty notice if a penalty is due
- a letter setting out what the final position is.
A contract settlement is a legally binding agreement, where you offer to pay everything that is due as a result of the HMRC check, and HMRC agree not to use their formal powers to recover that amount. You can only pay through a contract settlement if both you and HMRC agree to this, and to the terms of the contract. HMRC cannot enter into a contract settlement for any VAT or VAT penalties that are due.
Your principle rights and obligations
- You have the right to be represented. You can appoint anyone to act on your behalf. This includes professional advisers, friends, etc.
- You have the right to consult your adviser. HMRC will allow a reasonable amount of time for you to do so.
- HMRC can only ask you for what is reasonable for them to carry out their check. What is reasonable will depend on the circumstances of the check.
- You have an obligation to take care to get things right.
- If you have an adviser, you must still take reasonable care to make sure that any return, documents or details they send HMRC on your behalf are correct.
If you have any concerns about this topic and would like our assistance please do give Sue Stephens a call.