The Finance Act 2008 has introduced new powers for HM Revenue and Customs (“HMRC”). The review of HMRC powers was deemed necessary after the merger of HM Customs and Excise (“HMCE”) and the Inland Revenue in 2005. Until 2007 HMRC had been operating under their individual statutes.
It is likely that HMRC powers will feature in all Finance Acts until at least 2010. HMRC criminal powers have already been revamped together with new penalties for errors on returns leading to an understatement of tax.
The Finance Act 2008 has extended the penalty regime in the area of failure to notify to most other taxes and duties and now affects income tax, corporation tax, national insurance contributions and VAT.
Schedule 36 of the Finance Act 2008 sets out various information and inspection powers.
Powers of Inspection
The powers of the previous regime previously exclusive to HMCE have been extended to their Inland Revenue colleagues. For instance an ‘officer of HMRC may enter a person’s business premises and inspect: the premises; business assets that are on the premises; and business documents that are on the premises if the inspection is reasonably required for the purpose of checking that person’s tax liability’.
Taxpayers should be aware that there is no right of appeal against this power and it is a matter for HMRC to decide whether their powers have been exercised reasonably. HMRC’s power extends to anywhere in your home if you work from home or bring work home. HMRC should give you 7 days notice unless overridden by an authorised officer. While Tax bodies recommend that an authorised officer should be independent of HMRC this will not be the case. A Notice of Inspection can on request from an authorised officer, be approved by the First-tier Tribunal Tax Chamber (previously known as the VAT and Duties Tribunal).
Power to Remove Documents
An officer has the power to remove a document at a reasonable time and retain it for a reasonable period if it appears necessary for the officer to do so. The officer must provide a receipt for the document and provide a copy if requested without charge.
We can offer advice to businesses in respect of the extent of HMRC powers and access to your premises and business records.