As part of its drive to tackle tax evasion, HM Rev-enue and Customs (HMRC) has been using spe-cialist teams to undertake intensive reviews of specific sectors to try and uncover those who underpay their tax. Twelve of these ‘taskforces’ were launched in 2011, and another six have recently been released, with targets including rental businesses, restaurants and markets. The approach is for each sector to be selected after a risk profile analysis has been undertaken and for the teams to focus on particular areas of the country; London, Scotland and the Northwest have already been under the taskforce spotlight. An intensive burst of compliance activity is then carried out on the target sector in that location, including unannounced visits.
Family offices should not be unduly concerned in respect of the taskforces as, since 2009, the complex affairs of the super-wealthy have been dealt with on a more personal basis by HMRC’s High Net Worth Unit (“HNWU”). However, there have been unsettling incon-sistencies in the approach applied by HNWU inspectors undertaking checks of taxpayers’ positions, with some sticking to the roadmap more closely than others. This has meant it can be difficult to tell how an investigation is likely to pan out. Some inspectors work tax enquiries on a non-statutory basis, taking time to explain and ask “informal” questions and are thus quickly resolving minor inconsistencies outside the rigidity of the formal tax enquiry framework.
Informal approach
Having gained the acceptance of taxpayers and their agents to this new informal approach, it is unfortunate other taxpayers have found inspectors starting off on the right foot before lapsing into long periods of silence, which in some cases are followed by formal enquiries containing several pages of questions being launched in the final days before the statutory window for starting a compliance check closes. It is hoped, therefore, that taxpayers whom HMRC consider to be “customers” of the HNWU ought not to find themselves the subject of a visiting task force, but some may be wary of such opti-mism and it remains to be seen whether family offices will find themselves receiving visits in spite of having been led to expect a cooperative approach from their Customer Relationship Managers at the HNWU.
Visiting taskforce inspectors may arrive unan-nounced where an HMRC review has assessed that risk factors are sufficient to deem a pre-arranged visit inap-propriate. Where this happens, HMRC is obliged to provide a written notice to the occupier of the premises, but in the absence of the occupier, this can be left with the person who appears to be in charge, or failing that, it can be left in a prominent place. These unannounced inspections should not relate to any period in respect of which a tax return has already been submitted, unless the return is already the subject of an enquiry. It is worth noting that if there is no enquiry and HMRC does not have reason to suspect that tax has been underpaid, the inspection should be limited to VAT and PAYE, or to a period for which a return has yet to be filed.
The taskforce incentive sits alongside a raft of other recent changes at HMRC, including a “Business Records Checks” programme aimed at ensuring adequate statu-tory records are being maintained by small businesses, and a series of “amnesties” offering preferential settle-ment terms to those with tax irregularities who come forward and settle up within a specified time period – such campaigns include the well-publicised Liechten-stein Disclosure Facility.
New Powers legislation introduced in 2008 sets out the framework under which HMRC police compli-ance checks, including rules covering which records a visiting inspector is allowed access to on a site visit. Where family offices do find themselves the subject of an HMRC visit, they should ensure they are aware of their rights and the behaviour standards expected of HMRC Officers and also where there may be grounds for appeal.
