New Tax Compliance Checks Regime: HMRC warning: 3rd March 2009

HM Revenue & Customs warned tax advisers and accountants that they need to get ready for the new aligned Compliance Checks Framework effective from 1st April 2009.

HMRC will have one set of new powers and safeguards covering PAYE, VAT, Income Tax, Capital Gains Tax, Corporation Tax and the Construction Industry Scheme.  There are new Information and Inspection Powers; record keeping requirements; time limits for tax assessments and claims – and some safeguards.  These new rules completely rewite the rules of engagement in dealing with a tax enquiry.

The Taxman will have power to:

  • Visit businesses to inspect the premises, assets and records (including at your home, if that’s where you work);
  • Ask taxpayers and third parties (e.g. your bank and business contacts)  for information and documents;
  • Change record keeping requirements after 1 April 2009.

New Time Limits for Assessments and Claims

There are also new time limits for making assessments and claims. These will be fully in force for most Income Taxpayers on 1st April 2010 (except for certain VAT time limits which will take effect from 1st April 2009), and there will be transitional arrangements from 1 April 2009. They will not apply to individuals outside SA until 1st April 2012.

The basic rules for PAYE, Income Tax, Capital Gains Tax and Corporation Tax are “behaviour” driven.  If HMRC believe you have been under-assessed to tax they can make further assessments in the following time limits; depending on what behaviour of yours they believe caused the under-assessment:

  • Four years: the normal time limit, in all cases, even innocent error;
  • Six years: Careless Error (except for VAT which is 4 years);
  • Twenty  years: Deliberate Error; Failure to Register for VAT, Failure To Notify chargeability to tax, Failure To Notify tax avoidance schemes.

The time limit for taxpayer Claims is four years.

The new time limits apply from the end of the accounting period or tax year.

Correcting returns and ending Corporation Tax enquiries

New powers for correcting returns and ending Corporation Tax enquiries will apply from 1st April 2010.

What does it mean for me?

Taxpayers’ agents will have to be thoroughly familiar with the new rules, and be vigilant in upholding their clients’ rights and the few protections available, and defending them from intrusive and unjustified use of these powers.

Lynam Tax specialise in dealing with HMRC and are experts in the application of these new rules and how to defend clients from unfair or inappropriate use of HMRC powers.

If you need advice and help in a difficult Tax Enquiry call Lynam Tax Enquiry Experts now on 0845 643 9997 or email partners@lynamtax.co.uk