You’re not? Well you should be. Why, because recently he has got a big boost in his powers. He can now visit your business premises merely by giving seven days notice and in some cases by giving no notice at all. Can you refuse to let the taxman in? Yes you can, but in certain circumstances you can be fined for doing so. Once on your premises he will probably attempt to ask you and your staff all manner of questions about the business. Your staff could drop you in it if they volunteer answers to questions that they have little or no knowledge of. Can the taxman turn up at your home? Yes but only if you run your business from it. Can he search your vehicles? Yes if they are used to run the business, e.g. the Lorries in a haulage business.
The taxman can, without your permission and knowledge, ask your customers, your suppliers and even your bank about your business. Why would he want to do this? To find out if that purchase you have recorded actually took place. To establish that cash purchase made by your customer was actually recorded as a sale in your accounts. To obtain copies of bank records that you might be having “difficulty” finding.
Are you likely to get a visit from only one person? No you are more likely to get a visit from several, one to look at the VAT records, another to look at the PAYE records and a third to look at the calculation of the businesses profits.
What should you do if you receive notification of a visit?
- Immediately talk to your accountant and ask him to attend the meeting.
- Instruct your staff to refer any questions from the taxman back to yourself.
- If you are not sure of the answer to a question asked by the taxman tell him you will need to consult your records before answering.
- Do not try to pull the wool over the taxman’s eyes.
This last point is particularly critical because it will determine the size of the eventual fine you will receive if it is found that you have under declared your tax.
If after spending what could turn out to be months reviewing your books and records and questioning you and your accountants, the taxman finds you have not paid enough tax in a particular year he may well make the assumption that similar “errors” have occurred in the previous six years. If he determines that these errors were deliberate he can add fines equivalent to the amount of lost tax and interest. So what started out as a couple of thousand pounds of tax in one year could finally amount to £25,000 or even £30,000 when extrapolated to six years and both interest and the fines have been added. On top of this there is the amount of time your accountant will have spent on liaising between you, your records and the taxman. In a recent three year investigation of one of our clients our fees came to in excess of £4000 and the taxman did not find a penny extra tax. Imagine how galling this would be if it happened to you? Fortunately for our clients they had taken out our insurance policy against just such an occurrence so the insurers and not they paid our fees.
Does your accountant offer this protection?