This Business Brief explains the factsheets HM Revenue & Customs (HMRC) issue to customers during a compliance check. The factsheets are designed to help explain to them in plain English:
The factsheets are issued at different stages during the compliance check. Customers can also request a factsheet at any stage during a check or they can view and download them from the HMRC website. It is possible that they will pass these on to their accountant or tax agent.
The factsheets cannot explain everything about a subject but they do give the customer essential information so that they can make sensible informed decisions. The factsheets do not replace the detailed guidance in the Compliance Handbook.
Under the review of HMRC's powers, deterrents and safeguards legislation was introduced to align and modernise how HMRC administers the taxes and duties formerly handled by Customs and Excise and the Inland Revenue.
This included a new compliance checks system for how the department checks a customer’s tax is correct. The new system came into effect from 1 April 2009 and consists of:
The new rules apply to Capital Gains Tax, the Construction Industry Scheme, Corporation Tax, Income Tax, National Insurance contributions (Class 1 and 4), PAYE, and VAT from 1 April 2009.
Finance Act 2009 extended the earlier legislation to apply it to Aggregates Levy, Climate Change Levy, Inheritance Tax, Insurance Premium Tax, Landfill Tax, Petroleum Revenue Tax, Stamp Duty Land Tax and Stamp Duty Reserve Tax from 1 April 2010. The time limits for making tax assessments and claims were also aligned at four years but there are transitional arrangements so these do not become fully operative until 1 April 2011.
Other legislation introduced new penalty systems to support the compliance checks framework.
In addition Section 94 established a system where HMRC could publish the details of people who were penalised for deliberately evading the payment of at least £25,000 of tax, and who did not fully cooperate with HMRC.
Details of the legislation involved can be found at Appendix 1.
The factsheets are:
CC/FS1 - General Information
CC/FS2 - Request for information and documents
CC/FS3 - Visits – Pre-arranged
CC/FS4 - Visits – Unannounced
CC/FS5 - Visits – Unannounced – Tribunal approval
CC/FS6 - What happens when we find something wrong
CC/FS7 - Penalties for errors in returns or documents
CC/FS8(T) - Help and advice (for TEEL cases only)
CC/FS9 - Human Rights Act
CC/FS10 - Suspending penalties for careless errors in returns or documents
CC/FS11 - Information about the failure to notify penalty
CC/FS12 - Information about VAT and Excise wrongdoing penalties
CC/FS13 - Publishing details of deliberate defaulters
HMRC1 - HMRC decisions – what to do if you disagree
Factsheet CC/FS1 gives customers general information about compliance checks and their rights. It is issued with every opening letter or with the first letter telling a customer about a new compliance check.
Requests for information and documents
Factsheet CC/FS2 explains what happens when HMRC ask for information or documents during a compliance check. It is issued with every information notice. CH223100 explains when HMRC will issue an information notice.
Visits – pre-arranged
Factsheet CC/FS3 explains pre-arranged visits to customers and explains why HMRC may need to look at the business records or assets. It is issued in advance of all pre-arranged visits. CH253000 explains more about pre-arranged visits.
Visits – unannounced
Factsheet CC/FS4 explains under what circumstances HMRC may need to make an unannounced visit and the safeguards that are in place to protect the customer. The customer will be given factsheet CC/FS4 at the same time they are given the Notice of Inspection. CH254000 explains more about unannounced visits.
Visits – unannounced – tribunal approval
Factsheet CC/FS5 is given to the customer if a tribunal approves a visit because the customer has refused HMRC access to business premises, or HMRC have identified concerns that can only be dealt with by an unannounced visit. It also explains the penalties HMRC can charge if entry is refused, and the safeguards that are in place to protect the customer.
The customer will be given CC/FS5 with the Notice of Inspection. CH254540 explains how HMRC can seek the approval of a tribunal.
What happens when we find something wrong?
Factsheet CC/FS6 explains what happens when HMRC identify an inaccuracy in a return or documents, or a failure to notify. It explains how HMRC work with the customer to put things right and how HMRC charge or repay any tax difference that results from what it found.
CC/FS6 is issued when HMRC find something wrong during a compliance check, even if it may result in an overpayment of tax. It may also be issued at the start of a compliance check where, for example, a customer has made an unprompted disclosure or HMRC have made a discovery.
Penalties for errors in returns or documents
Factsheet CC/FS7 explains when HMRC may charge a penalty for an inaccuracy in a return or document, the penalty ranges for the different types of disclosure and behaviours, and what the customer can do to reduce any penalty.
HMRC will issue or give the customer Factsheet CC/FS7 when they become aware that a penalty may be due. CH80000+ explains penalties for inaccuracies more fully.
Help and advice
Factsheet CC/FS8(T) gives customers general information about compliance checks, their rights, and where to go for help and advice. It is issued only in cases where the compliance check has arisen from work done by HMRC’s Targeted Education, Enabling and Leverage teams. It is issued at the start of a compliance check instead of the CC/FS1.
Human Rights Act
Factsheet CC/FS9 explains a customer’s rights under Article 6 of the European Convention on Human Rights when HMRC are considering penalties.
Factsheet CC/FS9 is issued or given to the customer when HMRC find something wrong during a compliance check and have reason to believe the customer may be liable to a penalty.
Suspending penalties for careless errors in returns or documents
Factsheet CC/FS10 explains what happens when HMRC have identified that a customer is liable to a penalty because of a careless inaccuracy in a return or document and it is considering if it can set conditions that will allow it to suspend the penalty.
CC/FS10 is issued when HMRC start to discuss the possibility of suspending a penalty for a careless inaccuracy in a return or document. CH83130 explains when a penalty may be suspended.
Information about the failure to notify penalty
Factsheet CC/FS11 explains when HMRC may charge a penalty for a failure to notify, the penalty ranges for the different types of disclosure and behaviours, and what the customer can do to reduce any penalty.
It is issued or given to the customer when HMRC believe that a failure to notify penalty may be due. CH70000+ explains more fully the failure to notify penalty.
Information about VAT and Excise wrongdoing penalties
Factsheet CC/FS12 explains when HMRC may charge a penalty for a wrongdoing, the penalty ranges for the different types of disclosure and behaviours, and what the customer can do to reduce any penalty.
It is issued or given to the customer when HMRC believe that a VAT or Excise wrongdoing penalty may be due. CH90000+ explains more fully the VAT and Excise wrongdoing penalties.
Publishing details of deliberate defaulters
Factsheet CC/FS13 explains under what circumstances, and what conditions have to be met before, HMRC can publish the details of deliberate defaulters.
Factsheet CC/FS13 will be issued before HMRC start to discuss the possibility that a customer's details may be published or when HMRC have reason to believe they may meet the conditions for publication. CH190000+ explains more fully about publishing the details of deliberate defaulters.
HMRC decisions - what to do if you disagree
Factsheet HMRC1 explains what customers can do if they do not agree with a decision they can appeal against. This includes details of how to ask for a review and how to appeal to the independent tribunal. Appeals, reviews and tribunals guidance explains these processes more fully.
The legislation is contained in:
Across the main taxes:
Together these changes created a new compliance checks framework for the main taxes and were announced on 12 March 2008 in Budget Note 97.
Together these changes extend the new compliance checking framework to other HMRC taxes and were announced on 22 April 2009 in Budget Note 89.
Issued 31 August 2010