HMRC’s compliance checks might sound daunting, but they’re a key part of how the UK tax system stays fair and on track. It’s not just about keeping an eye on things; these checks help make sure everyone’s paying what they should, so it’s fair for all of us. This guide is here to break down what these checks are all about, why they’re important, and give you some handy tips on handling them. Think of it as your go-to resource for navigating these checks with less worry and more confidence.
Understanding HMRC Compliance Checks
His Majesty’s Revenue and Customs (HMRC) conducts compliance checks to ensure that everyone pays the right amount of tax at the right time, claims the correct allowances and tax reliefs, discourages tax evasion, and maintains tax system fairness. These checks can be triggered by various factors, such as inconsistencies in tax returns or significant changes in your financial situation. You can find out more about what triggers an HMRC compliance check here.
The Role of Tax Agents and Advisors
If you have a tax agent or advisor, it’s important to make sure they have formal agent authorisation to handle your compliance checks with HMRC. This authorisation allows them to communicate and deal with HMRC on your behalf. If they don’t have this authorisation, you must arrange temporary authorisation. If you’re an agent yourself, it’s important to apply for formal agent authorisation or arrange temporary authorisation for your clients to manage compliance checks efficiently.
Why Does HMRC Carry Out Checks?
HMRC may initiate a compliance check for reasons such as:
- Figures entered on a return that appear incorrect.
- A large VAT refund claim is made when turnover is low.
- A small amount of tax is declared when turnover is high.
HMRC will contact you and your tax agent (if you have one) to explain what they wish to check and why. If you believe the check is unnecessary, you can communicate this directly with HMRC.
Continuing Your Tax Obligations
Even if a check is underway, it’s important to continue filing tax returns and paying taxes if they’re due. Compliance checks can also extend to tax credit claims to make sure you receive the correct amount.
Cooperation During the Checks
During the checks, HMRC might ask for information or documents, and they may ask to meet with you or visit your business premises. If you don’t think this is necessary or it is unreasonable, you can speak to the officer in charge. If an agreement can’t be reached, HMRC may use legal powers to get the information needed. HMRC does this by sending you an information notice. If you receive this, it is important to give HMRC what they’ve asked for; otherwise, you may be issued a penalty.
The Importance of Accurate Information
You’re responsible for providing accurate information to HMRC. If you have a tax agent, make sure they’re fully informed about your financial situation. Cooperation can lead to a quicker resolution and potentially reduce any penalties if inconsistencies are found.
Need Help During the Checks?
HMRC understands that dealing with compliance checks can be challenging, especially if you face personal difficulties or health issues. If you communicate these to HMRC, they can work with you to put reasonable adjustments in place. Also, if you need more time for a valid reason, don’t hesitate to request it.
Appointing Someone to Speak on Your Behalf
You can appoint a friend, relative, or adviser to handle communications with HMRC. Just make sure to appoint them officially first.
Seeking Independent Help
There are charities and organisations available to help if you’re struggling with the compliance check process. If the checks are affecting your mental health, speak to your GP, or organisations like TaxAid, Mind, or Samaritans can offer support.
Outcomes of Compliance Checks
If the check finds everything is in order, HMRC will quickly close the case. If you have overpaid tax, you’ll receive a refund with interest. On the other hand, if you’ve underpaid, you’ll need to repay the amount, possibly with interest and penalties.
Dispute Resolution and Appeals
If you disagree with HMRC’s decision, you can appeal. You usually have three options: providing new information, having your case reviewed by an unrelated officer, or arranging for an independent tribunal to hear your appeal.
Penalties and Criminal Investigations
If inconsistencies are found during the check, you may face penalties. However, the extent of your cooperation can influence the penalty amount. HMRC generally handles fraud through civil investigation procedures, reserving criminal investigation for particularly severe cases.
Compliance and Expert Help
Understanding HMRC’s compliance checks is important for every taxpayer. By maintaining accurate records, seeking professional advice, and cooperating with HMRC you can confidently navigate these checks. Remember, these checks are in place to ensure the tax system is fair and efficient for everyone. If you need help or have concerns about a compliance check, don’t hesitate to get in touch.