HMRC has powers to visit businesses and inspect the premises, assets and records. It can also ask taxpayers and third parties to supply more information and documents.
They may visit unannounced, but without a search warrant or formal written authorisation must give seven days’ notice of a visit or agree a shorter period. Legal requirements have also been put in place to ensure the correct conduct of these visits.
We have set out some practical guidance in the event of an unexpected visit by HMRC.
1. Admitting an HMRC officer onto your premises
- Firstly ask the officer for identification. You do not have to admit HMRC on to your premises. If the officer is already on your premises, ask them for the purpose of their visit.
- If the officer is merely asking for a tax payment you may decide to pay the officer on the spot. If so, obtain an official receipt. Otherwise, obtain details of the tax demand and refer it to us by post or preferably fax.
- In other cases, telephone your Menzies contact.
- We will ask you to provide us with identification of the HMRC officer. For example their name, from which office they are visiting and how many others are in their team?
- Refer the officer to your Menzies contact. We will continue the telephone conversation. The officer will be calling to inspect your business or enforce a debt.
Once invited on to premises, officers may choose to leave at their own discretion. However, you may still obstruct the inspection procedure. Obstructing an inspection procedure is not a criminal offence. A civil penalty [£300] cannot be charged for obstruction unless the visit has been authorised by the First Tier Tribunal.
An inspection is not the same as a search. Officers may only inspect those items that are made available to them. They cannot open cupboards or visit other rooms unless invited to do so by you. Officers must never be left to their own devices.
HMRC officers may inspect and copy the business records including statutory books, business books and papers, PAYE, VAT and any other documents that form part of the business records of the taxpayer. Private records, if they contain business transactions, may also be inspected, as may assets such as stock.
HMRC may interrogate computer business records and enlist clients’ assistance to do so. In some cases HMRC may remove some records.
We advise clients to verbally resist the removal of computers and other assets, such as stock, unless these items are covered by a distress (distraint) order.
HMRC officers must provide a formal receipt for any items (records or assets) removed.
The destruction or concealment of tax related documents not only attracts a financial penalty but can amount to a criminal offence. For example, where documents are subject to legal approval by the First Tier Tribunal, Crown Court, County Court or Magistrates Court.
Concealment would be, for example, the prior removal of certain sales invoices from the invoice ledger but the act of refusing to supply the invoice ledger is not concealment, it is an obstruction.
Our policy is that it may be better to obstruct and risk a return visit or penalty charge, rather than grant access especially when we are prevented from making a flying visit to you.
3. Search warrant
A search warrant must be ordered by a Circuit Judge or Justice of the Peace, no more than 14 days before the search, in accordance with the Police and Criminal Evidence Act and to take place within the dates and times shown on the warrant. Details of those attending including any police officers or bailiffs as well as HMRC officers will also be included.
HMRC will conduct a search for material on the premises which would be of substantial value to the investigation of an indictable tax offence. HMRC can not inspect or remove documents protected by legal privilege such as correspondence between the client and their lawyers provided the communications are for the purpose of seeking and receiving legal advice. Correspondence with us is not subject to legal privilege.
If you have already admitted the officers willingly it is extremely difficult to withdraw consent once officers are on the premises. It may therefore be almost impossible to eject officers once consent has been initially given. A search includes seizure of documents and removal by officers if inspection on site is not practical. Before the officers withdraw, ensure that a copy of the search warrant has been left with you.
4. Computers on site
Recent case law has supported the removal of computers from site in order to interrogate hard disk data. We advise all clients to ensure that as a precaution, regular back ups are taken not only to protect data commercially but to guard against accidental damage or loss of data by HMRC officers.
5. Distraint action
To enforce payment of a tax debt, HMRC deploy their own officers to collect tax and national insurance contributions including direct powers of distraint or they enforce through a Court Order. A bailiff will be engaged to attend a distraint action carried out by HMRC or under County Court or Magistrate Court Order. Goods seized can be removed and sold at public auction on account of or to satisfy the debt.
In HMRC distraint cases the distraint officer is in charge of the seizure of goods, not the bailiff. The role of the bailiff is to advise the distraint officer, ensure possession of goods seized and arrange goods removal where appropriate. The distraint officer will request payment, and if not forthcoming, may then list goods considered to be appropriate to the sum demanded. If there are insufficient goods, the distraint officer may still proceed to list those evident.
The distraint officer will then provide a list of these goods and attach this to a Distraint Notice. If this notice is not signed then the distraint officer may remove these goods. As a very common alternative, the distraint officer would invite you to sign the Distraint Notice and inventory which entitles goods to be retained on site. The goods are now property of HMRC but in practice, may be used (but not consumed) by you. A common example of this is that a motor vehicle may be driven and used whereas stock listed can not be sold to customers or given away. If you refuse a walking possession the distraint officer may leave any nominated person of their choice in possession on the premises until goods can be removed. This is the least likely option to be chosen.
In a Court Order case the bailiff is in charge of the seizure of goods. The procedures that then follow will be similar to those of a distraint officer.
If you have any further queries about HMRC visits or visits made in your absence please contact your Menzies tax representative for more information or email email@example.com.