Business News - June
HM Revenue & Customs's new enquiry powers
HMRC says they want to achieve a greater consistency across all the taxes (income, corporation and VAT), in terms of both penalties and how taxpayers are monitored. It’s has been under review since the Inland Revenue was merged with HM Customs and HM Revenue & Customs emerged, and for taxpayers, this means greater powers for HM Revenue & Customs to review their tax affairs.
Penalties for incorrect returns and failure to notify a taxable activity
There will now be a single penalty regime for incorrect returns across all taxes, levies and duties administered by HMRC. The penalty will be determined by the amount of tax understated, the nature of behaviour giving rise to the understatement, and the extent of the disclosure by taxpayer.
Penalties for incorrect returns will be calculated using the established method, which takes into account the amount understated and the extent of the disclosure. Honest mistakes will go unpunished but there will be a penalty of up to 30% for failure to take reasonable care, 70% for a deliberate understatement, and 100% for a deliberate understatement with concealment.
If a taxpayer takes active steps to put right the problem, this will be taken into account. For an unprompted disclosure of a failure to take reasonable care the penalty could be reduced to nil.
Compliance checks
The legislation also includes new powers designed to align and modernise HMRC’s access to records an information. The new package will introduce:
- A power to inspect records required under the record-keeping legislation;
- A power to require supplementary information relevant to establishing the correct tax position;
- A power to require third parties to provide information relevant to establishing the correct tax position;
- A power to visit business premises and to inspect records and assets;
- An updated criminal offence of destroying or concealing records requested under a notice authorised by a tribunal.
The normal assessment time limits by which the amount of tax due can be changed will (generally speaking) be reduced, severely so in most cases of failure to take reasonable care.
New recovery powers
HMRC is to gain new powers to pursue tax dodgers through the courts, under new measures.
The new power to take control of goods or by action through the civil courts will allow debts to be recovered in a single action. Currently through the inherited system taxpayers can face two sets of costs and fees from recovery.
With HM Revenue & Customs new enhanced access rights, which means it can inspect a business, the new penalty regime and record keeping requirements inspections will be more frequent. The purpose of these ‘real time’ visits is to monitor the general quality of accounting records kept in support of a future return. If records do not comply with minimum, standards, HM Revenue & Customs can issue an assessment to tax on the basis that underpayment is likely because of poor quality accounting records.
Here at Clay Shaw Thomas Limited we can help in a number of ways to make any enquiry run smoother and mitigate any potential under-declarations of tax and resulting penalties and interest.
Firstly, we can help with record keeping requirements by offering Sage computerized accounting systems we have experienced in house staff who can come and install the software and provide appropriate training and ongoing back-up.
Secondly, we offer tax investigation insurance which will cover the cost of professional fees in the event of an enquiry by HM Revenue & Customs.
Finally, we have experts who have a vast range of experience in dealing with all aspects of HM Revenue & Customs enquiries and inspections into all the various taxes.
If you are interest in any of the above please email tellmemore@clayshawthomas.com or telephone 01656 867167.
