Be prepared for question time
In March of this year, HMRC concluded a pilot for its new Single Compliance Process (SCP) – a system designed to ensure that whenever a tax investigation takes place the parameters of the process are the same for every business.
A decision is still pending on whether the SCP will be rolled out nationally, and when indeed this will take place. However, it seems likely the SCP will be with us all shortly.
While no one doubts that SCP will level the playing field between tax inspectors and the inspected, a change has been announced regarding how the targeted businesses will be contacted in the first instance.
Previously the first contact occurred when HMRC approached a business directly and without warning – an action that naturally took the business by surprise, placing it an instant disadvantage, and perhaps equally naturally upsetting the firm’s accountants.
However, the pilot scheme appears to have demonstrated that taking taxpayers completely unawares and irritating fellow tax professionals is not the most efficient way of commencing a tax audit, and so this ‘out of the blue’ approach to SMEs has now, at least to some extent, been modified.
Under the new rules, when HMRC decides to mount an investigation it will now make the first approach by writing to the company, and then allowing the company up to a week to respond. If the company does not reply within this period, then HMRC will contact the company’s accountants by telephone within the following 14 days. If for any reason the accountants cannot be reached, or do not reply, then the responsibility redounds to the business, which will be questioned directly.
Past experience suggests that a week (in real terms, of course, only five working days), may not be sufficient time for a letter to penetrate the internal protocols of HMRC, and the deadline can easily pass while a busy CEO is concentrating on more important matters. If this should happen, the recommendation is to contact HMRC immediately and explain that a response was sent, but has not been acknowledged.
Once notification has been received and the SCP investigation is confirmed, businesses have three weeks’ grace before HMRC expects its questions answered directly.
Since an SCP can be instigated purely at random, the onus is clearly on the company to maintain up to date financial records and to have ready access to relevant fiscal data more or less continuously.
Although this is self-evidently good business practice, smaller companies, particularly during times of stress, can sometimes lose focus on this aspect of management.
In any event, all businesses are advised to contact their accountants as soon as they receive the first notification of an SCP.
All the evidence indicates that any dealings with HMRC are more efficiently and equitably resolved when the firm’s accountants are involved from the very outset.
To find out more, call Lansdell & Rose on 020 7376 9333 or visit www.lansdellrose.co.uk