HMRC – Under Cover or On-The -Spot

02 September 2016

Flushed with success following the introduction of their Connect scheme (an information sharing program), HMRC have once again been focussing on cash-based businesses.

As a part of their investigations, officers from HMRC often pose as customers in restaurants, fast food outlets, bars and even hairdressing  salons , with a view to obtaining more information about businesses whose income is cash-based.  By masquerading as a normal customer, an experienced HMRC officer can gauge how well a business is doing by observing orders, counting customers and seeing how many staff are working.  He can then make an assessment of the scale of trade and ascertain whether that is in line with the income being declared.  The assessment may be carried out over a number of visits at different times and perhaps by different officers.

It’s important to remember, however, that if a representative of HMRC attempts to carry out an on-the-spot compliance test, you have the right to refuse in certain circumstances.  If you are busy working, the visit is outside normal hours, or the paperwork required is not at the premises – or indeed, if you consider the request to be unreasonable – you can politely ask him to leave and make an appointment to return at a more convenient time.  The only time HMRC (much like anyone else) can enter your premises uninvited, is if they have a warrant.

Always contact your accountant or tax advisor if HMRC have told you they wish to look at your books and records, even if you are certain everything is in order.  They can arrange to be present at the visit, if you so wish, and in some cases, can request the inspection be held at their own offices. They will also be much more adept at dealing with any issues which may arise and can ensure that you are treated fairly by the inspecting officer.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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