Insights

HMRC may be closing down local offices up and down the country, but the investment being made into improving compliance operations continues. There are now over 22,000 dedicated compliance staff focusing purely at looking into areas where the perception is that there are frequent errors which result in an underpayment of tax (either accidentally or deliberately).

HMRC’s compliance monitoring resources are broadly divided into three departments focusing on:

• Large Business;
• Individuals and Small Business;
• Wealthy Individuals & Mid-sized Businesses

Now that yields from larger businesses are believed to have been maximised, it’s the last group – wealthy individuals and mid sized businesses - where HMRC plan to focus their attentions with a view to collecting both tax and penalties in the event that errors are uncovered.

How HMRC operates compliance checks - what to expect

Employers in the Mid-sized Business category, with a turnover between £10 million and £200 million, are being targeted to receive a notification of a request for a Check of Employer Records from HMRC. This is essentially an initial check to assess whether it is necessary to conduct a full Employer Compliance Review. The first step in the process of an Employer Records check is likely to be a compliance check questionnaire, which is then followed up with a detailed telephone interview between HMRC and a senior financial officer at the company.

What are the common non-compliance danger areas?

When HMRC looks into employer compliance, there are a number of areas where errors commonly occur and therefore areas on which it will focus its attention:

• Ensuring business mileage logs exist to support business mileage claims;
• Checking that temporary and permanent workplaces have been correctly identified;
• Ensuring entertainment expenses are accurately calculated and receipts kept to support the amounts claimed (including details of who was entertained)
• Checking the status of self employed workers e.g. consultants, subcontractors, freelance workers and temps;
• taxation of termination payments to ensure they qualify to be paid free of tax and national insurance.

It’s important for a business to be able to produce records to demonstrate compliance with all of the above areas. Failure to reassure HMRC could result in a full blown Employer Compliance review (PAYE visit).

If your business falls within the ‘mid-sized’ category and you suspect non compliance in any of the common danger areas listed above, or if you have other concerns about your compliance position as an employer, please contact Anne Eager at RJP to discuss your situation. We can help you to rectify problems and potentially minimise the risk of an enquiry being opened, or if you have been advised HMRC want to visit we can support you through the process.

For more information contact Anne via ae@rjp.co.uk