Unexpected visits by HM Revenue and Customs
From 1 April 2009 HMRC have granted themselves new powers to enter the premises of businesses.
This has caused a great deal of concern among the business community and a great deal of lobbying has taken place over the ‘consultation’ period granted by HMRC.
In order to enter the premises the HMRC officers must have attended to one of the following:
• Obtained agreement for the visit with the business owner (taxpayer) or:
• HMRC can unilaterally set a time (i.e. they just turn up) for a visit provided:
o It is at a reasonable time and
o They have given at least 7 days notice of the visit OR
o The inspection is carried out by or agreed by an inspector authorised for such inspections.
What does this mean?
It means HMRC have a right to enter premises of businesses. It does not mean that HMRC can force entry – they have to be allowed access. It does not mean that they have rights to enter residential addresses that are being used for business.
It does mean that they can just turn up at a reasonable time to inspect the premises.
They can inspect documents, business assets and the premises. This does not mean that they can search or ransack, they cannot go looking around unilaterally. They must ask for documents which you will be obliged to provide to them (otherwise HMRC could allege that you are obstructing the inspection).
What to do if you are the subject of a surprise inspection
• Have an action plan. please see this link with a reduced flow chart showing what course of action to take, we would recommend that you print this off and put it in your top drawer.
• Contact us
• Check the authority of the inspector. He should have a notice with him that states that he and his team intend to make an inspection and their authority to do so is under “Schedule 36 of the Finance Act 2008”.
• If the inspector is an authorised officer (or the inspection has been agreed by one) then the key is to check whether they have been authorised by the First Tier Tribunal (the documentation they carry will say so). If the inspector has this authority they will have had to demonstrate good reason for the visit to the tribunal – so it is likely to be serious.
i. If the inspection is authorised by the tribunal, then there will be a £300 penalty for obstructing the inspector in his inspection, therefore, unless you are prepared to pay the £300, you will need to accommodate them straight away. If the inspection is tribunal authorised then you could take the decision to turn them away and pay the £300. Alternatively you could allow the inspection to commence and we can attend later.
ii. If they are not authorised by the tribunal then theoretically you can just turn them away until a more convenient time. There are no penalties for doing so. However this may not be the best course of action. If this is the case then it would be wise to delay the inspector (tell them to wait outside) until we can attend the premises (to ensure that they conduct themselves properly).
The right to enter business premises is a new power for HMRC. Although their powers are somewhat restricted and contained in the legislation it is inevitable that there will be over enthusiastic inspectors out there who will overstep the mark. Therefore in these early days it is vital that HMRC are not allowed to run amok with the powers they have been granted.
As always feel free to contact us with any queries you may have or if you need us to expand on any of the points above.
More information: You can access HMRC’s own fact sheets on unannounced visits here; they are reasonably well written and understandable.