HMRC Visits

HMRC visits explained

HMRC are increasingly visiting businesses, whether on an announced basis or more frequently just turning up. Quite often HMRC will bring a letter explaining that their checks are legal. HMRC will ask for all business records and often want to speak to staff. Although this is on the guise of a check it should be remembered that this is a tax investigation and HMRC are visiting because they believe that there is something wrong.

What is common with these sort of visits is that people assume that HMRC are allowed to do whatever they want and to speak to who they want. Allowing HMRC free and unfettered access can often lead to many questions and issues that could have been nipped in the bud if HMRC had been restricted.

Announced HMRC visits

If HMRC arrange a visit in advance, then it is our view that the matter should be closely controlled by someone who understands what HMRC can and cannot have with regards to access to people and records. If a person subject to a visit knows that there are matters that are not correct then it is important that these are disclosed in the correct way to HMRC at an early stage. The correct handling of the HMRC visit can result in a quicker and more ordered tax enquiry and less disruption to a visit.

Announced visits tend to relate to:

• A PAYE Audit which is a review of the operation of PAYE, benefits in kind and whether contractors are self-employed or employed
• A VAT visit where HMRC check the VAT returns and supporting documentation. HMRC may also ask shops to print off current things including the Z printout and check them to current records
• A Cross Tax Enquiry. This is a relatively new concept and it is targeted at businesses with turnover of between £10m and £50m. In effect HMRC visit for a significant number of days and look at all aspects of the company's taxation affairs from VAT and Corporation Tax to PAYE and National Minimum Wage
• National Minimum Wage Visit. This is to check that businesses are correctly paying the National Minimum wage. It should be noted that most of the National Minimum Wage tax investigations are as a result of someone informing HMRC that they are not being paid the national minimum wage

Unannounced HMRC visits

If HMRC turn up unannounced then this generally indicates that the matter is more serious and that they believe that a business is at risk of not complying with matters if normal routes are used.

HMRC will arrive with what is a legal notice to say that they have a right to inspect the records and enter the premises. Most businesses therefore comply and let HMRC look at anything they wish.

Although it is true that HMRC do have a legally enforceable notice, it does not override common law and the request can be refused. We would always recommend that any person who receives an unannounced visit from HMRC politely declines to have the visit at that time as it is not convenient and you wish to seek professional guidance and that they suggest instead that HMRC come at an arranged time.

To quote from HMRC's own manuals at Compliance Handbook 256250:

"The person whose tax position you are checking or occupier of the premises you wish to inspect has the right to refuse you entry. It cannot be overridden, so a person retains the right to refuse entry to their property even when an officer has a right to enter and inspect with tribunal approval. You should try to establish why you are being refused entry and if possible agree a date and time for a return visit. If this is not possible, you should withdraw and try to arrange another visit at a later time."

We would then suggest that people contact a specialist to assist with the matter.

HMRC visit specialists

Following a visit then HMRC should, at the end of the visit, explain what their findings are or inform the person that they will be in contact with regards to their findings in due course.

HMRC are not always correct in their findings and if there is any doubt then we would recommend that professional advice is sought to ensure that the findings are sound in law and that they are based on facts.

We see many cases where HMRC undertake a visit with a view that the business has already done something wrong and then only look for facts to support that assumption and fail to look at all facts objectively.