HMRC spot checks

[malvolio]

Thanks for your comments above. I have insurance with PCG to cover tax investigations. What happens in the worst case, if I am challenged on IR35 but PCG (Accountax/Abbey) dont want to defend it (there is a clause to say that if they dont think there is a reasonable chance of success they wont defend the case). I guess I pay up in that scenario???



Yes, the contracts are sound, but I have no record that they have been checked. However, it is the more subtle working practices criteria that are more unclear.

So what you do if you get the brown envelope is contact the office, fill out the claim they'll send you and sit back while the professionals deal with it. There is no question you will be defended, unless you have done something illegal, so I've no idea where you got that idea: PCG spent close to £500k pursuing the Arctic case, they won't balk at a basic investigation.

It's why you joined, remember.

[xoggoth]

Tax officers will no longer make unannounced visits to small companies

They were doing that? Must have wasted a lot of time. One is obliged to keep adequate records but AFAIK there is no requirement for them to be instantly accessible on demand.

[TestMangler]

Thanks for your comments above. I have insurance with PCG to cover tax investigations. What happens in the worst case, if I am challenged on IR35 but PCG (Accountax/Abbey) dont want to defend it (there is a clause to say that if they dont think there is a reasonable chance of success they wont defend the case). I guess I pay up in that scenario???



Yes, the contracts are sound, but I have no record that they have been checked. However, it is the more subtle working practices criteria that are more unclear.

In that case, you should read up on how to invoke this cover if required.

There are a few things you have to ensure that you do (and don't do). From a certain point in the 'check up', if it develops into something more, you have to ensure that you don't answer or hand over anything.

Best read the policy or phone the helpline if you're worried.

Taking the opinions of people who don't actually know is not a good idea

[d000hg]

The question I would ask is why are you so worried about it? If you have done what you can, show due diligence in your accounts and correctly declared your IR35 status what is to worry.

Because even if you're in the right, being investigated would be a big PITA?

If you get a spot check do you have to explain everything, or can you just say "here's a password to my DropBox account, off you go"?

[BolshieBastard]

Have now been suspended. They will be re assessed and probably re implemented post April.

Taxman calls a halt to spot checks for small businesses - Telegraph

[myexpensesonline]

HMRC spot checks and MyExpensesOnline

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[myexpensesonline]

HMRC spot checks

Are we talking about the proposed 50,000 business records checks over each of the next 4 years? If so, HMRC started a "trial" in certain parts of the country before the results of the consultation were announced.

A cynic might suggest that they hoped to find something to add weight to their argument in anticipation of resistance and yes, I am a cynic.

If you are asked for your records you have to provide them all, although you could make them available to HMRC at any location. Remember, if they could determine that you do not keep adequate records, you face a penalty of up to £3,000, which would probably be followed by a full enquiry.

If you are VAT registered you would have to allow the VATman access, HM Revenue & Customs: Visits by VAT officers

As an aside, do you have a professional body that you are registered with for Anti-Money Laundering purposes, or are you with HMRC for this? If the latter, they might try to gain access through this, HM Revenue & Customs: Visits to your business under Money Laundering Regulations

You say you are not caught by IR35 "in your view". Who draws up your contracts and has anyone had a look at them to see how robust they may be?

If you used an accountant, even for some elements of your accounting/tax work, they should be able to offer you Fee Protection Insurance for a one-man company for less than £250 per annum.

For that, all of the professional costs are covered for dealing with any enquiry into the IR35 question, so you have a qualified professional in your corner, and (certainly with the insurance provider we use), in the event of a record check, we can have a meeting with the client before we see HMRC (usually at our premises) and can also attend the HMRC meeting itself (hand holding), all paid for by the insurer.

In the current climate I have told almost all of our clients to anticipate a record check over the next 4 years.

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[Taxless]

Did Accountax /Abbey have any input to the wording of the contracts. If so I would think you are on pretty strong ground and I would have thought that they would then be obliged to help.

If not, you fight it yourself, with the help of your accountant if you use one, or you cave in. Remember HMRC's record on IR35 is not nearly as strong as they would like, which is one reason why there was so much talk of it being ditched/amended earlier this year.

"However, it is the more subtle working practices criteria that are more unclear."

If the contract is sound and reflects the true working arrangements i.e. it isn't a sham, then HMRC are pretty well done.

If you are happy with the contract then I wouldn't get too stressed.

The average person making a record check, should you get one, will not be an IR35 specialist, although he may know a man who is, but at least you will get some indication at that stage that this is maybe going to kick off a debate and so you would have a chance to appoint someone to assist you at that stage if you are looking at saving costs.

The Record Checks are a new concept and so we have no real idea how these will work in practice yet but if the check starts to expand into uncomfortable questions you can stop that leg of it at any time.

If you don't know the answer to any question simply say so and that you will research the matter and get back to HMRC after the visit.

If you feel really uncomfortable just say that you feel you need the assistance of a professional adviser and that you want the meeting terminated. They can continue with the record check but that is it.

They should actually make this offer to you at the outset if you are not represented.

Good luck.

[the4thamigo_uk]

Thanks for your comments above. I have insurance with PCG to cover tax investigations. What happens in the worst case, if I am challenged on IR35 but PCG (Accountax/Abbey) dont want to defend it (there is a clause to say that if they dont think there is a reasonable chance of success they wont defend the case). I guess I pay up in that scenario???

You say you are not caught by IR35 "in your view". Who draws up your contracts and has anyone had a look at them to see how robust they may be?

Yes, the contracts are sound, but I have no record that they have been checked. However, it is the more subtle working practices criteria that are more unclear.

[ChimpMaster]

To bring up an old subject: do you think it's less likely that a company can be investigated once it has been closed down (say after ESC16 has been granted)?

[Taxless]

It's already started.

Are we talking about the proposed 50,000 business records checks over each of the next 4 years? If so, HMRC started a "trial" in certain parts of the country before the results of the consultation were announced.

A cynic might suggest that they hoped to find something to add weight to their argument in anticipation of resistance and yes, I am a cynic.

If you are asked for your records you have to provide them all, although you could make them available to HMRC at any location. Remember, if they could determine that you do not keep adequate records, you face a penalty of up to £3,000, which would probably be followed by a full enquiry.

If you are VAT registered you would have to allow the VATman access, HM Revenue & Customs: Visits by VAT officers

As an aside, do you have a professional body that you are registered with for Anti-Money Laundering purposes, or are you with HMRC for this? If the latter, they might try to gain access through this, HM Revenue & Customs: Visits to your business under Money Laundering Regulations

You say you are not caught by IR35 "in your view". Who draws up your contracts and has anyone had a look at them to see how robust they may be?

If you used an accountant, even for some elements of your accounting/tax work, they should be able to offer you Fee Protection Insurance for a one-man company for less than £250 per annum.

For that, all of the professional costs are covered for dealing with any enquiry into the IR35 question, so you have a qualified professional in your corner, and (certainly with the insurance provider we use), in the event of a record check, we can have a meeting with the client before we see HMRC (usually at our premises) and can also attend the HMRC meeting itself (hand holding), all paid for by the insurer.

In the current climate I have told almost all of our clients to anticipate a record check over the next 4 years.

[LisaContractorUmbrella]

My advice to you would be to give them what they ask for; they will get it from you one way another in the long run

[northernladuk]

The question I would ask is why are you so worried about it? If you have done what you can, show due diligence in your accounts and correctly declared your IR35 status what is to worry.

Give them all your properly filled in books, receipts and contract and wait for them to sign you off as clean.

[the4thamigo_uk]

I hear that HMRC are going to start rolling out their program of spot checks from July? If I get a horrible brown HMRC envelope through my letterbox, how should I respond to it? As I understand it, I am not obliged to let HMRC into my premises (i.e. my home), but I must make my books available to them? As an IT contractor, if they see my books, they may (wrongly in my view) suspect that I need an IR35 review (and hence years of stress and pain defending myself). What is the minimum legal requirements that I must satisfy without giving too much information away? What is the best response to this?