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HMRC checks - All you need to know

The main thing to know is that HMRC (in our case the tax Inspectorate) is not intended to terrorize people or wish to find errors to impose a fines, no, on the contrary, does everything to help avoid errors and in some cases, just rings the bell for mistakes already made, which by itself a sign for human approach.


The HMRC is a meritocratic mechanism that aims only to protect the financial interests of the United Kingdom. There is nothing more and nothing less. When intention for audit appears, the causes can be numerous and varied.

Let's have a look at all these in a brief and simple form.


WHAT IS A INSPECTION

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HMRC can check at any time and the decision is made based on complex algorithms that trigger the signal when an error is detected. When this happens, you will be informed. And the audit that takes place, usually includes the following:

  • ➥ tax that you pay

  • ➥ financial accounts and tax calculations

  • ➥ tax return for a particular year

  • ➥ company's tax refund

  • ➥ payroll entries (PAYE)

  • ➥ VAT return

The most important areas for consideration are:

  • ➤ VAT

  • ➤ Corporate tax

  • ➤ Capital Gains Tax

  • ➤ Taxation issues in the construction sector (CIS)

  • ➤ R35

If you have an accountant, tax inspectors can contact him.

OTHER REASONS TO BE INSPECTED

  • ➜ Your industry is in a sensitive sector (e.g. weapon trade)

  • ➜ A third party complaint

  • ➜ Constant non-compliance of your obligations

  • ➜ Your financial statements do not comply with industry's standards

It is important to remember that there is always causeless checks as well. So make sure that your accounts are tidy, correct and up to date.

THREE TYPES OF INSPECTIONS

  1. Full - everything is checked

  2. Partial - check of a particular aspect

  3. Random - check is spontaneous and can contain anything

PROCEDURE AND TIME

Nothing is standard. Verification of certain documents can be requested remotely and on-site visits, which can be made without specifying the length of auditing duration. If so, always be prepared to cooperate.

As to how far the tax Inspectorate can work, it depends if it's a routine check or the errors found were not made intentionally. In such cases, it can go back 4 to 6 years.

If lets say a tax offense was committed on purpose, then the investigated material can be up to 20 years old.

RULES THAT WILL HELP YOU TO BE ALWAYS READY FOR INSPECTION

  • ✎ The Bank account must always be intended for one use (for example, do not mix a professional account with a personal one)

  • ✎ Always carry out Bank reconciliation

  • ✎ Keep evidence of each transaction (buy and sell)

  • ✎ Avoid accounting violations that may distort the tax return and other financial statements.

TWO GOLDEN RULES

  1. Accounting errors will knock on your door much later than the day you made them.

  2. Do not skimp on the accountant. If you do not pay him, in case of errors, you will definitely pay several times more in penalties.


For more please visit GOV.UK




© 2019 UPECO LTD

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ATTENTION!


This article intends to give only a general informative picture and should not, in any case, be taken as a rule. It is strongly recommended to seek a full and professional guidance specifically for your circumstances before making any decisions.

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