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Monday, July 14, 2008

Finance Act 2008 gives new powers to the HMRC

And you thought they had enough already!

I wasn't going to go over this subject again, but because of its implications, I thought it important to cover the subject for the last time.

This new act brings together some issues that are going to effect your future relationships with the tax man (as I still like to call him).

In short you will be penalised if HMRC believe you have not taken reasonable care in preparing any information (accounting or otherwise) that underpins any returns made to them.

It is likely that any undeclared tax will be subject to a penalty of 30% and if HMRC can prove negligence or fraud this could rise to 100%

The way in which these errors can be discovered are set out in changes to HMRC's legal powers to to investigate your returns.

These include checking that:

An amendment to a return or claim or return is correct,
statutory record keeping requirements are being met,
tax has not been underpaid or over-claimed,
any issues concerning possible tax avoidance are considered.

So you can see that any tax officer who may visit will take a special interest in the way you have kept accounting records. Particularly those records that effect your VAT & payroll.

There is no right to appeal against HMRC seeing records as there have been changes to the law in the Finance Bill 2008.

Another interesting development recognises the use of computers in storing relevant data. HMRC are quoted as saying " Any authorised person may, at any reasonable time, obtain access to, and inspect and Check the operation of, any computer and any associated apparatus or material which is has been used in connection with a relevant document"
This would provide officers access to any computer which has been used in connection with accounting records (including supporting documents) required of the tax payer. This is a new development, as normally tax payers would expect HMRC to have access to the records themselves, but not the computer(s) on which the records have been prepared or maintained. The practical implications of this are significant. You may want to ensure that no vital business information is kept on the same computer as accounting records. so that any breach of confidentiality, or even business business disruption is kept to a minimum.should they want to access your computer during an enquiry.

For most businesses the new rules will have an effect for accounting years ending March 2009. So the records you are presently updating for this period may be open to inspection.

I suggest that if your accountant hasn't already told you about these new rules, then contact him straight away and ask them if they know about these new rules and how it effects you (if at all)

AS usual, I can't take telephone calls, but can be contacted via

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