By Lynne Gowers on 4th September 2014

Changes to HMRC tax investigations

HM Revenue and Customs (HMRC) will be able to go back further than the current six year mark to retrieve information, a new tribunal ruling has suggested.

This would allow HMRC to go back as far as it likes to look into a company’s liability. Legal advisories, such as Latimer Hinks, Oxley & Coward and Miller Hendry, have suggested that it is therefore important that companies, and freelancers themselves, be extremely cautious about ensuring that all documentation and contracts are up to date and clear.

HMRC no longer limited when it comes to investigations

In particular, this may cause concern for freelancers with regards to IR35 should HMRC want to investigate the actual stance of an employment with regards to the tax that the individual is paying. Again, it is imperative to ensure that all documentation, past and present, clearly states that there is no exclusivity.

This news comes after Whitefields Golf Club Ltd lost its case against HMRC in an investigation that actually began in 2003 after it decided to restructure its activities. The initial investigation essentially stopped after a few years after the inspector retired, with the documentation that the club had given either lost or destroyed by HMRC.

In 2011, when the investigation was picked up again, Whitfields was asked to hand over a second lot of documentation. Once Whitfields refused to do so, it was issued with a formal notice under Schedule 36 of the Finance Act 2008, allowing HMRC to take information and documents that are reasonably required… in a bid to investigate tax liability.

Although HMRC had lost the documentation in the first place, first tier tribunal judge Kevin Poole said: Whilst this might be a valid reason for some embarrassment on HMRC’s part, we do not consider it is sufficient reason to allow the appeal in full.…

This particular ruling does suggest that there could be issues with many businesses who believed that they did not have to provide anything once the six year mark was up.

What this essentially highlights is the importance of ensuring your finances and documentation are all organised, that you are 100 per cent covered should HMRC want to investigate the possibility of a freelancer falling within IR35.

Written by Lynne Gowers
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