Inspection of Schemes Operated by Financial Intermediaries

Contents

Introduction

These Guidance Notes explain how we carry out inspections of schemes you operate and promises that we will treat you fairly and courteously, in accordance with Our Service Commitment To You and the law. It also explains the rules we will work to and your rights and responsibilities.

We want

  • financial intermediaries (people who operate tax deduction and relief at source schemes) for example banks, building societies, letting agents and Local Authorities to deduct and account for only the right amount of tax, and give and claim back only the right amount of tax relief
  • UK letting agents to pay over rental income to non-resident landlords only when authorised to do so
  • insurance companies and Friendly Societies to issue certificates to their customers and us when a chargeable event occurs
  • financial institutions and letting agents to send us complete and accurate information returns by the due date.

We will help you achieve this.

Most financial intermediaries operate correctly, but some do not take enough care, so we inspect a sample of records to check they are complete and correct.

You have the same rights as any other taxpayer when we inspect your records.

Audit & Pension Schemes Services (APSS) is part of Savings Pension and Share Schemes (SPSS), a division of HMRC Charity Assets & Residence (CAR) and is responsible for auditing these schemes.

We set high standards for our inspections and aim to work accurately and provide appropriate advice and help on any problems we find.

If we find that you have not complied with your legal obligations we will aim to recover the right amount of tax, or any excess repayment, along with any interest or penalties due.

We

  • will complete our work as soon as we are satisfied that everything is in order, or settled
  • are happy to give you advice or make recommendations to help you get things right, even if we have not inspected your records
  • can give you further information about the schemes you operate.

You can get a number of our handbooks and guidance notes from the APSS on request.

How we conduct inspections

Arranging the inspection

We make regular visits as part of an inspection programme. The frequency and timing of inspections generally depends on how much tax we think may be involved. Most inspections are routine and do not necessarily mean we doubt the accuracy of your claims or tax returns.

You must operate the relevant scheme correctly. Unless we have reason to believe otherwise, we will presume you have done so. An inspection is necessary to test the completeness and correctness of your records. We have a legal right to inspect your records and will give you a minimum of 14 days notice, if we intend to visit. We will:

  • also remind you to consider telling your professional adviser
  • try to give you more notice, especially if your business is complex and you are likely to need extra time to prepare
  • tell you how long we expect to stay and what records we will need
  • try, where possible, to arrange another time if our proposed date is inconvenient.

You should tell us before the inspection if you find that you have made incorrect claims or tax returns.

If you conduct business through a large branch network, we will arrange a pre-inspection visit (if necessary) to discuss how the inspection will proceed and tell you what we will need to do.

Professional representation

You can at any time

  • get professional advice, for example from an accountant, although you will remain responsible for the accuracy of your claim or tax return
  • change or stop using a professional adviser.

We will deal with anyone you appoint unless you ask us not to. If there is little progress in settling matters, we will tell you and could then deal directly with you (or anyone else you might appoint).

You should give your professional adviser all the facts as you are personally responsible for your tax affairs and the accuracy of all information supplied to us.

Providing information

We will try to take up as little of your time as possible by asking everything we need to know early in the inspection. We will only ask questions later on if strictly necessary. You can speed up the inspection by giving us all the relevant records at the beginning and an explanation of any unusual record-keeping systems you have.

We will give you a reasonable amount of time to provide any information we need. You can suggest another time scale if you think we have not given you enough time. If we do not agree, we will tell you why.

We will give you every opportunity to give us all the information we need and to explain any mistakes or omissions from your records. If we accept your explanations we will close that line of enquiry otherwise we will tell you why.

You can keep your costs and time down by providing any information we ask for promptly. You should tell us if you cannot get the information we have asked for or if you think it is not relevant and we will tell you what to do. If we think we still need the information, we will explain why.

We have legal powers to get information from you but will only use them if you do not co-operate with our request.

You and your employees do not have to answer any of our questions and can consult a professional adviser before replying. You are the people most familiar with your records so your co-operation can help speed matters up.

You have the right to ask us why we are continuing our inspection if you believe you have provided everything that is necessary. If we are not satisfied, we will explain why.

Meetings

We might ask to meet you to discuss facts that only you know about your business and the schemes that you operate.

You do not have to come to any meeting we invite you to but they will give us both a chance to put forward any questions or explanations which will take much longer to deal with by letter. You can bring your professional adviser, if you have one.

We will make a written record of our meetings with you, and you can ask for a copy. You have the right to comment on anything it contains that you do not agree with.

Examining your records

We are entitled to see any documents, books or other records, which are reasonably necessary, relating to the scheme we are inspecting or ask to photocopy certain related records.

We will

  • normally select a random sample for checking, and will explain this to you
  • need to see all records relating to the scheme we are inspecting including, any records held by anyone else
  • usually examine records at the place they are normally kept.

We will ask for your permission before speaking to the people who keep the records or maintain your system. If we need to examine your records elsewhere, you must provide all the records, including any computer records.

You are responsible for keeping full and accurate records. You must also retain certain documents. You should tell us as soon as possible if you think your records might not be complete or correct.

You can ask us to

  • explain our inspection powers to you and which records we might inspect
  • select another sample if you think we have selected one that is unrepresentative.

Inspection reports

We will

  • give you a summary of our findings at the end of each inspection visit and, where appropriate, suggest possible improvements to your systems
  • send you a full report within 20 working days of the inspection (This will explain what we have examined, the extent of the work done, the findings, our conclusions and recommendations. You can disagree with any of our findings.)
  • send you a copy of the inspection report, including recommendations, even if we find no errors.

At the end of the inspection

If we find that your records have been inadequate, you have not operated any deduction scheme or tax relief scheme correctly or have failed to run the scheme correctly, we will

  • explain what was wrong
  • tell you how to get things right in future
  • arrange a special visit if necessary.

If you are still unsure why your records were wrong, or how to put things right in future, you should ask us or your professional adviser.

If we find nothing wrong

We will tell you and let you know that we have finished our enquiries.

If we find something wrong

Agreeing the amount of any tax over claimed or underpaid

If our inspection finds errors that indicate that you owe tax, we will

  • try to agree the amount with you
  • take all available information into account when calculating what we think you owe
  • offer you the chance to make a payment on account towards any additional tax we think you owe.

You should provide the information we need to let us work out your tax. If you do not understand our proposals you should ask us for a further explanation. You are entitled to

  • an explanation of our figures
  • have an opportunity to disagree, and
  • be professionally represented in any correspondence or discussion about the figures.

You do not have to pay anything on account if you do not think you should. But you can avoid interest on unpaid tax mounting up by making payments on account, once it is clear that you owe tax.

In some cases, you could offset any tax you owe against outstanding or future repayments due to you. If we find tax has been under claimed we will make any further repayments to you.

Assessments

We may make assessments if we cannot agree with you or if you do not give us the information we need to work out your tax. Any assessments we make will be based on all the relevant facts available at the time.

Appeal hearings

You have 30 days to appeal against any assessment you think is incorrect.

You can find out about how to appeal by

  • reading the notes with the assessment
  • asking us to explain the process to you, or

Wherever possible, we will try to agree the amount of your assessment with you without a formal appeal hearing.

You can ask for your appeal to be heard by the Commissioners at any time during negotiations. We will not regard this as a lack of co-operation. In fact we will arrange for this to be done if you ask us to, or if you prefer we will give you the Clerk to the Commissioners address if you want to contact him or her yourself.

If the appeal hearing has been arranged at your request we can ask the Commissioners for an adjournment if we need more time for our enquiries. Likewise, if we have requested the appeal hearing and you need more time to provide information you can ask the Commissioners for an adjournment.

We might ask the Commissioners to hear your appeal if our negotiations are making little progress.

We will

  • tell you if we intend to ask the Commissioners to settle your appeal
  • explain our figures to you as they might have to be higher than those we suggested during our negotiations. Those will have been 'without prejudice' to the full amounts legally due, and the Commissioners will need to consider all the relevant facts and issues.

You have the right to

  • put forward the figures you think are correct to the Commissioners
  • choose whether or not you want someone to represent you, providing the Commissioners do not object.

The Commissioners will make a decision on the figures, based on the evidence presented to them.

Interest and penalties

We can seek any interest and penalties we believe are due, if you

  • fail to account for any tax
  • claim excessive tax repayments, or
  • fail to make appropriate tax returns

We will explain why we think they are due if you ask us to.

When calculating any penalty we will take into account

  • the extent of the information you provided voluntarily
  • whether you were helpful, and
  • the seriousness of your errors or omissions.

You should tell us anything you think is relevant when we are working out any penalty. We will try to agree on the amount of any interest and penalties that are due. But we can formally determine any interest and penalties if we believe they are due even if you don't agree.

You can ask the Commissioners to hear your appeal against any interest or penalty determination.

Your rights under Our Service Commitment To You

During the inspection

We will

  • always be courteous, fair and professional
  • only ask for information we think is necessary
  • need to get information about your systems direct from your staff, even if you are professionally represented
  • normally deal with letters from you or your agent within 15 working days or let you know why
  • acknowledge receipt of any records we borrow, keep them safe and return them to you as soon as we can, and
  • give you free copies of your records within seven days if you ask for them.

Keeping you informed

We will explain your legal rights and our actions during the inspection. We will tell you, for example, why we

  • need to see particular records
  • need explanations from you, your staff or professional adviser
  • are not satisfied with your explanations, whenever that is the case, and
  • how we arrived at our proposals to settle matters. You can ask us at any time to explain your rights
  • why we have taken a particular action
  • what you must do under the law in any given situation, even if we have already told your professional adviser.

Confidentiality

We will treat your affairs confidentially and will only give information to people you have not authorised to receive it in the limited circumstances allowed by law, such as at Appeal Commissioner's hearings. We will not use any information we get from an inspection for any unauthorised purpose. Most inspection powers limit the use to which this information can be put.

Your Costs

We know that dealing with our questions can cost you time and money, so we will only ask for information we need to check that your claims or tax returns are correct.

We will make sure that our enquiries are reasonable and take account of all circumstances known at the time.

We try to

  • keep inspection visits brief, but the length will vary for each company or organisation depending on the size and complexity
  • avoid disruption to your business. You can help us by providing somewhere private for us to work.

We will end our enquiries when we are confident your records are correct, or that all errors or omissions involving more than a trivial amount of tax have been dealt with. You can help speed up the inspection by giving us all the relevant records at the beginning and by explaining any special or unusual record keeping systems you might have.

What can I do if I want to comment about the way my tax affairs have been dealt with?

Contact: Audit Customer Service

How to help us improve our overall service

We welcome any general comments you have on how to improve our service to all our customers.

Our Service Commitment to You

HMRC is committed to giving you the best service we can by

acting fairly and impartially

We:

  • treat your affairs in strict confidence, within the law
  • want you to pay or receive only the right amount due.

communicating effectively with you

We aim to provide

  • clear and simple forms and guidance
  • accurate and complete information

providing good quality service

We aim to

  • handle your affairs promptly and accurately
  • be accessible
  • keep your costs to the minimum
  • help customers with special needs
  • be courteous and professional.

taking responsibility for our service

We

  • publish our customer service aims and achievements annually
  • want to hear from you if you wish to comment, or complain, so we can improve our service. We advise you how to do this.

We can provide better service if you help us by

  • keeping accurate and up-to-date records
  • letting us know if your personal or business circumstances change
  • giving us correct and complete information
  • paying on time

Further information on customer service is available at HMRC local offices, set out in our Charters, complaint leaflets and via Customer Service