HMRC Tax Investigations: Know Your Rights

As the owner of a small business, you need to be aware of your rights before HMRC comes knocking at your door to undertake a tax investigation. Knowing what to expect determines how you behave during the audit process, and being co-operative during an HMRC tax investigation will put you and your company in a positive light.

Timing of Visits

HMRC usually gives you seven days’ notice if they wish to inspect your premises in order to get an overall view of your business. They will tell you exactly what documents they want to see and approximately how long the investigation will take.

HMRC can also send officers to visit your premises unannounced. This isn’t likely to happen unless you’ve consistently refused to grant them access in the past, or if they’ve received a tip-off and believe contacting you in advance would give you time to cover your tracks.

Allowing HMRC Tax Investigation Officers Access

When HMRC turns up for a pre-arranged visit, you are legally required to let them in. It is within your rights to check the identity of the officers. To do so, call the number you were given in your correspondence arranging the visit.

If the visit is unannounced, you have the legal right to turn the officers away. Before doing so, however, ask the officers for their credentials and who sent them. If their unannounced visit was approved by the First-Tier Tribunal (FTT), the appeal tribunal that deals with tax discrepancies, refusing entry could land you with a £300 fine.

Investigating Your Premises

HMRC’s officers have the right to inspect all business assets, documents, stock, and capital equipment on the premises of your business. During this process, you (or a member of your staff) should accompany the officer. It’s important to note that the right to inspect your business premises is not the same as a police-issued search warrant. The officer may only look at what’s on display, they cannot go searching through drawers or filing cabinets.

If you’re a small business owner running your company from home, the investigating officer has the right to investigate any part of your home that’s used for your business (such as a spare room you use as an office), but they have no right to see any other part of your home. Consider closing the doors leading into other rooms of your house before their arrival.

Contact an Experienced Accountant

Receiving notice of an HMRC tax investigation can be a daunting prospect for SME owners, especially if it’s the first time you’ve encountered one. Speaking with our professional tax accountants to discuss the implications of your upcoming tax investigation can help put your mind at ease. We provide tax advice for clients throughout London and in local areas including Putney, Wimbledon, Fulham, Hammersmith and from our Central London office in Cavendish Square.

Contact us today on 020 8108 0090 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

Aspects of this article were first published on 25/01/16 and updated on 31/01/18

Pension scheme

Limited Company Pensions: How to use pensions to the full effect

Limited Company Pensions and SSAS

If you own a limited company, Tax Agility can assist you in implementing an Occupational Pension Scheme, such as a Small Self Administered Scheme (SSAS), in your business. Setting up a SSAS has the following advantages:

1. The SSAS is a trust that acts as a separate legal entity from your limited company, which means that it can give you additional creditor protection in the event of your company becoming liquidated. In order to administer this pension scheme, you must become a trustee of the SSAS, together with a professional trustee, as required by the Pension Act legislation.

2. You can make tax-deductible contributions from your limited company to your SSAS to a maximum of £50,000 each year for every director who is linked to the SSAS.

3. Any assets you purchase within the SSAS will grow in a capital gains and income tax free environment.

4. You can convert any previous pensions held in a Self-Invested Personal Pension scheme (SIPP), or through a commercial pension provider, into a SSAS. This will bolster your capital within the SSAS and enable you to purchase assets within the SIPP.

5. The SSAS can be set up to receive private contributions from individuals receiving the 20% uplift from the government.

6. If required, you may loan back up to 50% of the value of the assets in your SSAS to your limited company on a secured commercial arm’s length basis.

7. The SSAS can acquire intellectual property, or any other fixed property, from your limited company, paying you in cash for the assets. This can provide liquidity to your business and protect the assets in the event of liquidation.

8. On retirement, you may take a tax-free 25% cash lump sum of the benefits in the SSAS. The remaining balance of the funds is taxed and may be drawn as an annuity.

At Tax Agility we can assist you to implement a SSAS structure to achieve the above benefits and unlock your shareholder value in your limited company.

For more information on how we can help you to set up your own SSAS pension scheme, or if you have any questions about what pension scheme is perfect for your limited company, call us today on 020 8108 0090.