Company compliance checks

HMRC are conducting increasing numbers of company compliance checks. HMRC’s compliance check team should give one week’s notice before starting a check, but may decide that an unannounced compliance check is more appropriate. A visit by Officers of HMRC is an intrusive and unwelcome interruption to the business activities of the company concerned. Such checks are always a worrying time for businesses and it is extremely important that HMRC’s compliance check team do not exceed their legal powers during a compliance check. HMRC may also ask to meet the company directors to interview them as part of the compliance process and a decision needs to be taken as to whether or not to agree to such an interview and if so where it should be held. For example, it may be preferable to hold the meeting in a ‘neutral’ location such as the offices of the company’s adviser.

There are many reasons why HMRC may decide to conduct a company compliance check. For example, HMRC may be following up a previous check where poor record-keeping has previously been identified, for example where an inaccuracy penalty has been suspended. Or, they may wish to check the computer systems operated by the taxpayer to ensure that the way in which information is kept will lead to accurate returns being made. Of even greater concern may be that HMRC are conducting a compliance check to find out about tax planning and avoidance schemes or where fraud is suspected.

HMRC will conclude their check with a ‘decision notice’, or by agreeing a contract settlement for unpaid tax with the taxpayer. It is important to remember that, if HMRC find errors in the company records they may, as part of the conclusion of the compliance process,  issue the company with a penalty notice.  A penalty notice may, for example, be issued where HMRC discover errors in the company’s financial records, even if the mistake was due to carelessness rather than any deliberate behaviour on the part of the taxpayer. Such penalties can be for substantial amounts.

In dealing with HMRC, there is no substitute for experience. Levy & Levy have in depth knowledge of the legal powers of HMRC’s compliance check teams and can be on hand to offer practical advice to ensure that a compliance check goes smoothly and with minimal business disruption.