HMRC Warns Taxpayers To Be Ready For New Compliance Regime

by Jason Gorringe, Tax-News.com, London

04 March 2009

Businesses need to get ready for the new aligned compliance checks framework that comes into effect next month, the UK tax authority HM Revenue & Customs (HMRC) has warned.

From April 1, 2009, HMRC will have one set of powers and safeguards covering PAYE, VAT, Income Tax, Capital Gains Tax, Corporation Tax and the Construction Industry Scheme. There will also be safeguards in place to ensure that the powers are used appropriately.

"With new information and inspection powers, record keeping requirements, time limits for tax assessments and claims and the accompanying safeguards, businesses need to make sure that they know what this will mean for them," explained an HMRC statement.

HMRC's Dave Hartnett said: "This new approach to compliance checks will improve HMRC's ability to ensure that the right tax is paid at the right time. We have consulted with taxpayers and their agents to make very sure that HMRC achieves the right balance between obtaining the information we need and appropriate use of our powers."

In addition to a single set of powers to inspect business records, assets and premises, the new legislation provides HMRC with:

• the ability to see statutory business records without a right of appeal;
• the ability to look at records for PAYE, income tax, the Construction Industry Scheme, capital gains tax and corporation tax during the tax year before a return has been submitted;
• a new power to correct obvious errors in a tax return based on information held by HMRC; and
• a single approach across all taxes to asking taxpayers and third parties for supplementary information, based on formal information notices with a right of appeal.

The legislation also makes some changes to the way HMRC must carry out compliance checks, including:

• a new four-year time limit for assessments and claims - a reduction from six years for income tax, capital gains tax and corporation tax and an increase from three years for VAT;
• reductions in extended assessment time limits;
• a streamlined process for closing corporation tax assessments;
• a new statutory ban on inspecting purely private dwellings without consent;
• a statutory requirement for HMRC to give at least seven days prior notice of a visit, unless either an unannounced visit is necessary, or a shorter period is agreed;
• a new requirement that unannounced visits must be approved beforehand by a specially trained HMRC officer; and
• a statutory requirement on HMRC to act reasonably.

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