A stream of announcements from HMRC in recent months shows that it is sharpening up its act on tax collection. In particular, it has a goal of collecting additional tax of £7bn each year by 2014/15.

HMRC has statistics showing that businesses with poor accounting records usually underpay tax. Therefore, it is piloting records checks for businesses across the country. Up to 1,200 SMEs will be approached to hold a meeting at their premises to check their records for the current tax year. The exercise will be rolled out fully in autumn 2011 with up to 50,000 SMEs checked annually and HMRC expects to collect an additional £600m over four years.

The main risk from a business records check is that HMRC identifies mistakes in the paperwork or worse and this leads to a subsequent tax investigation. However, refusing a visit should only be considered in exceptional cases as it is likely to put the taxpayer even higher up HMRC’s risk list.

For the traditional compliance visits (e.g. a PAYE visit), HMRC officers are now to follow a single compliance process and focus “solely on the risks and behaviours identified in cases and throughout the life of the compliance check, irrespective of the head of duty”. So, for example, if errors occur on a VAT return, officers will work on the assumption that errors have been made for other taxes.

This update is brought to you courtesy of  our strategic partner PKF LLP.