HMRC have said that, in most cases, the formal powers that they have will only be
exercised after the taxpayer has been given an informal opportunity to provide the
information. It is clear, however, that HMRC will not hold back from using the new
powers where they perceive that there is no positive response from the taxpayer.
The written request can be made directly by the officer or they can obtain the
approval of the First-tier Tribunal (FTT) which is the formal appeal Tribunal to dea
with tax disputes. If the request comes with FTT approval there is no right of appeal.
An appeal can be lodged against a notice from an officer although there is no right
of appeal against what are termed ‘statutory records’. Unfortunately this term is
open to wide interpretation.
The key requirement against which any request should be tested is that the
information is reasonably required to check the tax position. The law states also
that a document can only be required if it is in the possession and power of the
taxpayer.
To comply with an information order, the information has to be produced to the
officer within a specified period of time (this will usually be 40 days). The
information can be supplied at any reasonable location and time.
Compliance with the notice follows the same rules as for a taxpayer notice. If the
taxpayer receives a request from HMRC for information about someone else, the
taxpayer should seek advice on how to respond.
This is undoubtedly the most controversial part of the new legislation. Previously,
VAT legislation gave the right of access to premises but no equivalent power
existed in direct tax. HMRC consider this power to be a very important part of the
new investigation process and it is to be expected that they will use it as much as
they can. It obviously helps them to understand a business better by seeing it in
operation rather than simply working from a set of accounts and other descriptions.
Generally, the only premises that can be inspected are those of the taxpayer
whose tax position is being checked. This limitation does not apply in connection
with visits to premises where HMRC have reason to believe that taxable VAT
supplies are on the premises, or the premises are used in connection with the
acquisition of goods from another member state, or are used as a fiscal warehouse.
In these cases any business premises can be inspected.
The power enables HMRC to inspect the business premises and any business
assets and documents that are on the premises. This could include looking at
stock as well as at capital equipment. Business records such as sales invoices or
purchase information can also be inspected. It is important to stress that this is not
a search warrant, the officer can only look. If a visit takes place care should be
taken about what is visible and the inspection should be limited to only what the
officer has asked to see. The officer should also be escorted around the premises.
The short answer is ‘yes’. The power cannot be exercised in respect of premises
which are used ‘solely as a dwelling’ but where any part of a home is used for the
business then that part of the home is open to inspection. The officer has no right
to see any other part of the home and there may be practical issues involved in
ensuring that this does not happen.
Alternatively HMRC could give the taxpayer written notice of such a visit seven
days ahead of a visit date. This notice should state:
• the date, time and place of the visit
• the name of the HMRC visiting officer(s)
• which records the officer(s) would like to see.
If the visit has not previously been agreed and the time is not convenient, or if
the taxpayer does not want the visit to go ahead, HMRC should be informed
immediately. They may then arrange another, more convenient time, or may
decide on a more forceful approach – the unannounced visit.
effectively cover their tracks and
• also in cases where the taxpayer persistently refuses to allow agreed access.
Where an unannounced visit is made, the officer must provide a written notice to
the taxpayer. If they are not on the premises then that notice must be given to
someone who appears to be in charge and, if no one is on the premises, the
notice must be left in a prominent place.
Taxpayers have the right to turn them away. It should be pointed out that if
HMRC’s authority for the visit has come from the FTT a fine of £300 may be
incurred for refusing entry. Even if entry has been allowed, the taxpayer can ask
the officers to leave at any time and they must do so.
reception staff that they should contact a nominated person to attend and deal
with the officers.
If you need any further guidance on the matters addressed in the briefing or
have any concerns as to the operation of other HMRC powers please do contact
us for assistance.
Disclaimer - for information of users - This briefing is published for the information of clients.
It provides only an overview of the regulations in force at the date of publication, and no action
should be taken without consulting the detailed legislation or seeking professional advice.
Therefore no responsibility for loss occasioned by any person acting or refraining from action
as a result of the material contained in this briefing can be accepted by the authors or the firm.
Winter 2009.