Investigations by HMRC fall into several kinds, from a single issue to an in depth look with a view to imprisonment. So, it is best to look at these by way of increasing severity.
HMRC has very wide-ranging powers to investigate personal and business affairs at will. In some circumstances they are entitled to enter premises without notice to seek documents relevant to your tax affairs and they have draconian new penalty regimes established to maximise the amount of money that they can extract from clients if they decide that duties have been deliberately underpaid.
a) A visit to the business to see that HMRC’s understanding of what it does and how it does it is right, or simply to ensure they get paid.
The visit to your business or private premises can be done by a variety of different type of officers, and HMRC currently has over 1,000 in their debt handling team who work from home and visit businesses that are in arrears and have not made any recent contact with HMRC. These are pursuing the debts alone and are termed Field Force Officers, they are certified bailiffs and have the power to seize goods. This process of seizing goods and assets used to be called levying Distraint but in April 2013 it changed to what is now known as Taking Control of Goods. This can and will be done in other kinds of enquiries by the criminal investigation and serious issue teams.
Normally for anybody you owe money to, to be able to start Taking Control of Goods or seizing company assets they would normally first have to get a court order but HMRC have special unique powers in that they do not need to get a court order they can merely turn up unannounced at your premises and start the process of seizing assets. We may be able to help when this happens.
HMRC also has VAT Assurance officers and Employer Compliance Officers, whose roles extend from checking the business records, to ensure that the right form of VAT scheme is being used, or to checking the employer is paying above the national minimum wage or has created the company pension scheme for their employees. These are not normally too onerous enquiries if you have been doing things correctly, but if they say you haven’t, then we recommend the use of investigation specialists, many of whom we know and work with. This frequently leads to a quicker and cheaper settlement than just relying on what your accountant has done.
These same HMRC officers will have looked at the online filed returns you have made and will be able to add debts to these via assessments and determinations if they think something is wrong. They are also likely to ask for payment of penalties and surcharges. Again, using former HMRC employees and other specialists, we can assist in minimising these additional bills.
What other powers do HMRC visiting officers have?
If you are in arrears with VAT, PAYE, Corporation Tax or CIS payments, or if you have been a director of a Limited company that has liquidated with HMRC debts, then it is likely that you will receive a letter from one of the HMRC Securities Teams. As a former head of one such team, I know how intimidating this can be, particularly given that failure in respect of these notices is a criminal offence and HMRC do prosecute these on a regular basis.
If you have received a letter from these people, it will probably be headed either: –
- Warning – possible requirement for security in respect of Pay as You Earn and National Insurance Contributions, or
- Schedule 11 paragraph 4(2)(a) of the Value Added Tax Act 1994 provides for HM revenue and Customs to require an amount of security for the payment of VAT that is or may become due, or
- NOTICE OF REQUIREMENT TO GIVE SECUIRTY UNDER PARAGRAPH 4(2) (a) OF SCEHDULE 11 TO THE VALUE ADDED TAX ACT 1994, or
- NOTICE OF REQUIREMENT TO GIVE SECURITY IN RESPECT OF PAY AS YOU EARN (PAYE) TAX AND NATIONAL INSURANCE CONTRIBUTIONS (NIC)
Quite often these letters will be demanding payment of a very high sum of money. Often tens of thousands of pounds. They can only do this following a process and you have many rights in this. We believe that we can help you through the process and assist in ensuring the systems have not been abused.
b) A Desk based enquiry
What do HMRC enquiry teams do in their offices?
HMRC has access via the Governments internal database to the data everyone has filed with them online, but also other systems allowing them to look at the extra data they have been supplied with. This includes interest on accounts, as notified by banks, but also credit card sales data, planning applications and a myriad of other systems. They use this to profile for cases where they cannot reconcile the tax returns they have with the wealth or assumed lifestyle of the individual making the return. From this data, they select the highest risk cases for an enquiry, but they also look at a proportion of the others on a completely random basis for statistical reasons and to ensure that everyone should ensure they send returns completely compliant with the law.
Quite often HMRC carry out a compliance check by writing. The more serious enquiries originate with the old Inland Revenue enquiry teams who look at the income tax or corporation tax due from the business. The reason we believe this, is that they very quickly move away from the business to seeking the individual to explain their actions and why they should not be held financially responsible and required to make a payment towards settling an extra debt.
Like a VAT assurance or Employer compliance visit, where the staff came to you, again they want to investigate your business and check all your books and records and the returns you sent them, to see if they agree the self-assessment tax return is right. They usually start with a shopping list of requirements and whilst some may be readily available, and you might be willing to supply them, we strongly recommend getting advice first as occasionally, HMRC officers do ask for things they should not. The relevant officer is normally also required to have visited or to come at some point to the premises, so be aware that they do not launch these enquiries lightly and usually have a great deal of details to check against what you tell them, including already knowing your credit card sales etc from data they hold. By using specialists, we find the enquiry can be worked faster and you can get back to your business with this issue resolved and out of your mind, save for paying the settlement.
HMRC have now created a new special team to tackle internet type trading and as they have access to the Credit card sales for those using PayPal etc, they really do know what you should be telling them. They are being assisted in these investigations by eBay and amazon and other online sales channels.
c) A Criminal Enquiry, Special Team enquiry and the National Crime Agency (tax side)
These are the most serious areas of what HMRC does. They are looking at the ‘Al Capone’ route of pursuing individuals for tax offences, to place them in jail. All the work of this team should be taken very seriously. We work with specialists who seek to minimise the risk of a custodial sentence.
So, HMRC has specialist teams working over and above the other areas in the compliance arena, from those tackling a single tax issue like transfer pricing to the organised crime teams. Again, we can help, by using specialist tax enquiry contacts wherever necessary, but as several of us are fully trained former Inspectors of Taxes, we can do much of this work ourselves. The experience we offer clients extends far beyond an in-depth knowledge of tax legislation and case law. In many cases the key to a successful resolution is more about knowing how to present facts and scenarios to HM Revenue & Customs in a form that will enable an acceptable settlement to be made, rather than complicated tax legislation.
So, what can we do?
We have established a justifiable reputation for being skilful and hard but fair negotiators with HMRC. We understand the concerns and needs of people who are subject to investigation and act swiftly to take away these worries immediately, especially in the more serious cases being undertaken by members of HMR&C’s Specialist Investigation offices.
We can negotiate cost effective pragmatic settlements, whilst enabling clients to continue their business throughout the process of the enquiry.
For those unfortunate enough to have the experience of being involved in litigation and court proceedings we can provide support and specialised expertise both in case preparation and in the court hearing itself. We have extensive experience of cases of alleged fraud – particularly in defending clients against such claims by HMRC. As in other areas, there are often alternative ways of calculating tax liabilities which would prove beneficial to the client.