HMRC carry out compliance checks to ensure taxpayers and businesses pay the right amount of tax, at the right time. This partly involves checking that the amounts being claimed for or paid are accurate, and a true reflection of what is happening in the business.
Compliance checks can be carried out in writing or by phone. Time limits apply to some compliance checks and the officer from HMRC who is conducting the check will explain what they are. It may be necessary to check earlier periods, perhaps if an error is found or something is wrong.
The compliance check
HMRC compliance officers will explain what is being looked at and if anything further is to be checked, they will inform you. Documents and information which may be required to carry out the check will be asked for in advance. If you have business premises, the compliance check may be carried out there. If you have a business that you run from your home, compliance officers may want to visit your home address. You can ask why something is being requested, particularly if you believe a request is unreasonable.
If something is wrong
A compliance check will be carried out as quickly as possible, and if something is wrong, a penalty will be charged. If you believe or know that something is wrong, you can assist the officers. This is called ‘quality of disclosure’ and can help to reduce the penalty eventually charged. In addition to any penalty charge, you will also have to pay the additional tax that is due and late payment interest. If you give as much assistance as possible to the officers carrying out the check, you may be given a reduced penalty charge.
If you have deliberately set out to get your tax affairs wrong, you will face the maximum penalty amount, and could even be prosecuted by HMRC.
Managing Serious Defaulters
HMRC has a monitoring programme called Managing Serious Defaulters, which allows it to monitor the tax affairs of defaulters more closely. If you have deliberately got your tax wrong, you may be placed on to this programme.
Following a check
Once the compliance check is completed, either a decision notice will be issued to you or HMRC may agree a contract settlement with you. A contract settlement allows you to pay what you owe through specified terms.
Compliance checks can be extremely stressful and you may prefer to have a professional to deal with HMRC on your behalf.
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