The powers of HMRC: What can they actually do?

Knowledge base from Boox

By Jonathan London on 8th August 2014

The powers of HMRC: What can they actually do?

HM Revenue and Customs (HMRC) is a name that is all too familiar with freelancers and contractors across the UK.

Dealing with the body should be apart of your yearly routine when it comes to your finances, expenses and Self-Assessment Tax Returns.

Hopefully, most independent professionals will only ever have to deal with the HMRC for the right reasons (like those above). However, as the tax body can investigate you at random, there is a chance you could come into contact with HMRC for another reason.

But just what are HMRC’s powers and what can it actually do in terms of an investigation?

Powers of HMRC

They will tell you what they are looking into

If the tax office do decide to investigate you, it should make it clear why it is doing this and what aspect of your tax it is assessing.

For example, if HMRC get in touch with you about your VAT records, this is all it should look into.

According to its site: We will only review the records relating to the tax, duty or tax credit we have told you we will be looking at. If we intend to review a number of taxes, duties or tax credits at the same time we will tell you in advance, and we will give you the opportunity to decline.…

However, if some information comes up that in this aspect of the investigation that relates to other tax issues, the HMRC officer in charge will pass it on to the relevant arm of the organisation.

In short, HMRC officers should always make it clear before hand which aspect of your tax they are looking into. If during the course of a review of your VAT records, for example, an officers requests to see your income tax records but no prior warning has been issued, you can refuse.

Suspicion of fraud

If the HMRC suspects that someone is committing fraud, intended or otherwise, it can start an investigation under the Code of Practice 9 (COP9) investigation of fraud procedure.

Once this has been issued, the party who is being investigated is invited to disclose completely any intended or unintended attempts to hinder to tax system.

If the tax body believes that the person in question has not properly disclosed sufficient information to account for any tax discrepancies, then it can proceed with a criminal investigation.

Criminal investigation powers

Some people are intent on breaking the law and not paying tax, and whatever your thoughts on the HMRC may be, it’s the body’s job to stop this from happening.

Only those who actively involve themselves in breaking the law need to worry about HMRC’s criminal investigation capabilities, but it’s worth mentioning what the body can do just to show the true extent of its powers.

According to its website, the HMRC can:

  • apply for orders requiring information to be produced – production orders
  • apply for search warrants
  • make arrests
  • search suspects and premises following arrest

Code of Practice

At the end of the day HMRC is an official body and an extension of the UK government, and as such it has to abide by certain rules and regulations.

HMRC’s Code of Practice outlines what they are entitled to do and how its agents should conduct themselves.

If you do find yourself involved with HMRC or any of its officers then it could be wise to seek advice from your accountant.

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