Treasury relaxes HMRC inspection powers; business breathes a
sigh of relief
Leading business and financial adviser Grant Thornton says that
businesses will have breathed a collective sigh of relief at the
relaxation of HM Revenue and Customs (HMRC) powers being introduced
in the Finance Bill 2008.
Increased powers of inspection were announced in the 2008 Budget
and were meant to provide HMRC with the authority to enter and
search business premises with potentially as little as 24 hours
notice.
However, these powers have been debated and amended in the
Finance Bill to reflect a more 'relaxed' approach to HMRC
inspections, which will be subject to limits and conditions and
introduce at least seven days notice.
Francesca Lagerberg, Head of the National Tax Office at Grant
Thornton is pleased with these amendments. Lagerberg says, "There
are some welcome improvements here to safeguard taxpayers' rights
that the original draft had neglected. It is essential that any new
power for HMRC has a matching safeguard and is only used in limited
and appropriate circumstances. No one wants to see any possibility
of 'fishing expeditions' into taxpayers' affairs."
Lagerberg also notes: "Extending the notice time to seven days
will enable businesses to be better prepared for visits which can
be very stressful. In particular, small to medium sized businesses
will benefit greatly as many lack the resources to comply promptly
to an HMRC inspection. However, the new rules allow for a shorter
notice period (or no notice at all) to apply where this is agreed
with the occupier or it is approved by an authorised officer of
HMRC. This is unchanged from the original draft legislation.
"
In the original draft, the rules would have allowed tax
inspectors to enter and inspect any business premises to enable any
person's tax position to be checked, such as third parties.
This has now been amended to only the premises used by the person
whose liability is being checked (with the exception of premises
used in connection with the taxable supply of goods, in order to
help HMRC combat certain VAT frauds). In addition, the
inspection powers are limited so that tax inspectors may not enter
or inspect any part of the premises that is used solely as a
dwelling, so the taxman can not come into someone's home.
Lagerberg says that the finalised powers are still fairly
stringent in areas, but is pleased that the Treasury saw sense in
the more significant points being made by interested parties when
amending HMRC's powers and that there is guidance and a Code of
Practice to ensure HMRC uses its powers proportionately.
"These amendments are the result of positive dialogue between
the Treasury and business, and show the willingness of both parties
to engage on major issues to reach a reasonably beneficial
conclusion. Hopefully, this consultative approach will continue,"
Lagerberg added.