Included in the Finance Bill are significant changes to the powers which HM Revenue & Customs have in relation to matters such as inspecting records and obtaining information. Since the merger of the Inland Revenue and HM Customs & Excise, HMRC has been consulting with interested parties regarding its intentions to align its powers across all taxes it administers. The draft legalisation in the Finance Bill very much brings this process to the fore, with the expectation that it will become law from 1 April 2009. However, consultation on these matters is still ongoing.
One of the key changes will be the right of HMRC to undertake on-site visits to check business records in relation to corporation tax, income tax and capital gains tax. Whilst on-site visits have been in place for many years for VAT and PAYE, this has not been the case across all taxes. One of the most worrying aspects is HMRC’s intention to be able to inspect documents on site in respect of a tax return which has not yet been filed. The Consultation Document issued by HMRC in January 2008 (‘A new approach to compliance checks’) cites a number of circumstances in which such a power might be exercised, such as ensuring the business records accurately reflect the business and to check ‘current actions’ which are relevant to tax avoidance schemes. This is likely to result in further challenges by HMRC to schemes which it views as unacceptable tax avoidance.
Other features of the draft legislation include new penalty powers, record keeping requirements and extended rights to obtain information from third parties.
We are actively considering the impact of the proposed changes on our clients, together with the risk based approach HMRC adopts when selecting enquiry cases.
