HMRC cracks down on business tax compliance

business tax compliance


business tax complianceSMEs are being warned to keep their accounts in order as HM Revenue & Customs (HMRC) officers are likely to increase their business tax inspections from 1 April.

HMRC were previously only allowed to inspect a firm’s premises and ask to see the records for the purposes of checking VAT and employer returns. From 1 April, this process has been extended so that officers can check businesses are paying the right amount of income tax, capital gains tax, PAYE, corporation tax and, for contractors, tax under the Construction Industry Scheme.

Business owners will usually be given seven days’ notice of an inspector’s visit and will be warned which records they need to produce, but unannounced visits can also be made if the employer is suspected of being dishonest.

“HMRC will sometimes need to access premises connected with businesses to see such things as goods and assets where it is reasonable to do so, to ensure the right tax is being paid,” said HMRC spokesman Jan Maszewski. “But we will only carry out an unannounced visit if there was a suspicion that if we made an appointment, we might not get to see all the records.

“Under the new powers, we are able to build up a full picture of a business’ tax liabilities because we can look at every area,” he said. “We will do more to make sure people understand their obligations and rights when we make a check, so that they can put things right if they have made errors.”

The Association of Chartered Certified Accountants (ACCA) head of taxation, Chas Roy-Chowdhury, said that although it may not always be possible to have complete records to hand, firms need to demonstrate that they are keeping their invoices in order.

“Businesses should be aware that these checks could happen at any time and at the minimum they should demonstrate that they have kept all the invoices and receipts together, so that their books can be written up reasonably and their accounts will reflect the right amount of tax they should be paying,” he said.

“Most small businesses have fairly rudimentary accounting systems because they rely on their accountants to write their records,” added Roy-Chowdhury. “They will need to sharpen that up so that their invoices can be readily produced.

“This is the last thing businesses want in the current conditions, but they just need to ask their accountant to show them how to present their records to HMRC if they are inspected,” he advised. “As long as they are honest, they shouldn’t be anxious.”

HMRC have published a compliance checks podcast to help SMEs or you can read a set of FAQs explaining the compliance changes.

business tax compliance

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