An Inspector of Taxes has various rights of entry available when wishing to inspect your business premises to ensure that you pay the “right amount of tax”. Although HMRC will admit to being understaffed, and therefore you are possibly less likely than you were in the past to receive an inspection visit, you do still need to be aware of what to do should an Inspector come knocking at your business premises.
The first thing to remember is that the definition of a business premise for inspection purposes includes not only a place from where the business trades but, importantly, where business records may be kept. Therefore, if you keep your records at home, the Inspector may include your home as a possible place to visit.
Whilst most inspections will be pre-arranged for a mutually convenient time with the taxpayer (with at least seven days’ notice), Inspectors do have the power to obtain authorisation to make unannounced visits (although they do not have the right to force entry and you are not obliged to let them into your premises). If an Officer does arrive with a written notice, you should always ask for identification before letting them in. You can also phone HMRC to check the identity of the visitors.
The taxpayers of course will be caught unawares by such an appearance by the Inspector, especially if they are busy with the normal everyday activities of the business at the time (serving customers, etc). Whilst it could be reasonable to assume that you might be able to ask the Inspector to wait a few minutes before the inspection commences, you should be aware that in some circumstances you could be charged a penalty for obstructing an officer of Her Majesty’s Revenue & Customs in the performance of an inspection.
This should be borne in mind for any instructions left to members of staff if you are not at the premises and an Inspector calls.
Once inside, an Inspector has the power to inspect the business premises and any business records and assets that are there. This is not taken to mean that they can physically make a search but they can request access to records, providing the request is reasonable under the circumstances. The rules do place some restrictions on what information may be produced, but very few. Information or documents that the Inspector may not see include medical histories, correspondence from lawyers, journalistic material or items that are not physically present.
In the main, however, the vast majority of visits will be pre-arranged and you should, of course, contact your tax adviser or accountant as soon as you learn of an impending visitation from the other side.
As they say on Crimewatch, “Try not to have nightmares”.