COP3: Reviews of Employers' and Contractors' Records

Contents

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This Code of Practice tells you how we carry out visits to check the records of employers and also those contractors who are required to operate the Construction Industry Schemes.

It tells you how we will review those records and promises you fair treatment under the law and in accordance with Our Service Commitment.

It does not cover visits to your business premises that we might make for other reasons.

This Code of Practice gives guidance and information on

  • why we need to undertake reviews
  • how often you can expect to be reviewed
  • what you can expect to happen during the review
  • what standards you can expect from our officers
  • what we expect from you.

You may receive a visit by us, as part of our routine programme of visits to employers and contractors, if you

  • employ anyone for whom you should operate Pay As You Earn (PAYE), make Student Loan Deductions (SLDs) and account for National Insurance contributions (NICs)
  • employ anyone for whom you are authorised to pay tax credits
  • make expenses payments and/or provide benefits to your employees
  • use subcontractors in the construction industry.

We want to make sure that as an employer or contractor you understand your obligations and responsibilities

  • to deduct and account for PAYE, SLDs, NICs and / or subcontractor deductions
  • in relation to Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Adoption Pay (SAP) and Statutory Paternity Pay (SPP)
  • in relation to tax credits
  • for reporting details of expenses and benefits provided to your employees.

Please tell us at any time if you need help or any information about what you have to do.

We also want you to feel confident that other employers and contractors are operating the schemes properly.

Why we may need to visit you

If we decide to carry out a review of your records it does not necessarily mean that we think there is something wrong. We want to make sure that things are in order. The review might therefore be of all your records or a particular aspect.

Most employers and contractors pay over to us what is due and make correct returns to us. Unfortunately, however, some do not take sufficient care, and others deliberately try to pay less than is due, or deliberately provide incorrect information. So we review a sample of employers' and contractors' records to make sure they are correct and complete and to offer help if it is required.

We check that

  • you have paid the right amounts to us
  • any tax credit funding or statutory payment funding applications were correctly made
  • employees have been paid the right amount of tax credits
  • employees have been paid the right amount of statutory payments, and
  • you have shown complete and correct details on returns to us, including expenses, benefits, statutory payments and tax credits.

We may also visit if we think it is possible that you should have sent us some returns and you haven't done so.

How we arrange reviews

We will try to give you at least 10 days' notice of a visit. Usually we send a letter showing the dates between which we would like to call. If these dates are not convenient, or you want to make a specific appointment, you should let us know and we will be happy to arrange this. You must make the appointment within a reasonable period of time.

We do not routinely notify any professional adviser you may have of the review.

Occasionally we may telephone to arrange a visit. If so we will confirm the arrangements in writing. Sometimes a visit will be arranged following an exchange of correspondence about a particular matter.

If you are part of a group of employers whose records are kept in different parts of the United Kingdom (UK) we may arrange for someone from our Large Business Service (Employer Compliance) to visit you.

Very exceptionally, there may be circumstances where no advance warning of a visit will be given.

Who carries out the review?

One or two officers will visit you. Normally you will be told in advance how many to expect. Every officer will carry identification, which you are entitled to see.

How often we review your records

If you have a large - or medium-sized business we may visit you every four or five years. If your work force is small the interval may be longer. However, we may visit you more often if there appears to be a risk that the returns you make to us are incorrect, or if there is something about them that we do not understand.

Where does a review take place?

It is usually convenient if we see records where they are normally kept, as we will often want to talk to the people responsible for maintaining them. Please tell us if this means you want our review to take place somewhere other than at your business address.

The visit can also take place at any other location convenient to both of us, providing it allows us to see the records.

If we cannot agree where we will review the records, the officer can require that you produce the records at the place where you normally keep them, or at your main place of business in the UK.

Professional representation

You may authorise your staff to deal with us on your behalf or you can choose to be professionally represented, for example, by an accountant. You can exercise those rights at any time during the review.

You may also change or stop using a professional adviser at any time.

Whether or not you wish to be professionally represented, you may find it helpful to tell your adviser about our review, especially if you think he or she is the best person to answer any questions about the records.

If there is a lack of progress in settling matters, we will tell you and may then deal with you direct (or with any other professional adviser you may then appoint).

You will always be personally responsible for supplying the information we need and for the accuracy of that information, even if you have authorised your professional adviser or staff to deal with us on your behalf. You should, therefore, make sure that they have all the facts.

How long will the review take?

It is impossible to say in advance how long a review will take, but it should save time if we can see all your records at one visit.

If you have only a few employees or subcontractors, the review will usually take less than a day. It may take longer if you have a larger work force.

We will try to complete everything at the first visit, but may need to get more information before calling back another time. If this is necessary, we will agree a convenient time with you.

How the review will proceed

Firstly, we will discuss briefly with you the nature of your business and the size of your work force.

We will also ask about your record-keeping system, and who completes the records of

  • wages and salaries
  • tax deductions, SLDs and NICs
  • tax credit payments and any funding applications
  • statutory payments and any funding applications
  • expenses payments and benefits provided
  • payments and deductions to subcontractors.

You may want to have your bookkeeper or wages clerk present to explain the details.

We will then review your records. You do not have to be present the whole time as long as someone is available to answer any queries. We may then want to discuss some matters with you before we leave.

If you are an employer with a very large work force we may have a preliminary meeting with you. We will discuss how the review will proceed and explain what is required. We will confirm any arrangements in writing.

Reviewing your records

So that you can complete the returns required at the end of year, you should keep full and accurate records. Paper records may be preserved by the use of optical imaging provided that

  • what is retained is a complete and unaltered image of the underlying paper documents, and
  • you also provide the means to read the records when asked to do so.

If you are in any doubt about the amount of detail that you need to keep, you should ask your professional adviser or us for help. This is because the amount of detail needed varies from business to business.

You must keep these records for at least the last three tax years, as well as those for the current year. If you use any of these records to prepare your business accounts, or returns, you will need to keep them for longer.

During the review we will need to see the actual records of payments to employees and subcontractors and records relating to expenses payments and benefits provided, as well as any other records that are connected with them.

If you think your records may be incomplete or incorrect you should tell us as soon as possible. If you are unable to have all the records available in time for the visit please let us know, in order that we can arrange a further date for review or give you a reasonable time in which to obtain them.

It is not possible for us to specify here all the records that we will need to see during our review, but they can include

  • all records for wage earners (including part-time and casuals), salaried employees, directors and executives and all other 'office' holders
  • wages book, wages sheets and deduction working sheets (or computerised equivalent)
  • time sheets, clock cards and tachograph records (where appropriate)
  • cash books and cheque stubs showing payments to employees (including directors)
  • petty cash records and vouchers
  • ledger records
  • all records relating to payment of tax credits
  • all records relating to tax credit funding applications
  • payments of SSP and sick absence records
  • payments of SMP, SAP and SPP
  • all records relating to statutory payments funding applications
  • certificates and pension scheme details relating to reduced or exempt rates of NICs
  • any other records containing information about, or used in, calculating pay, expenses payments and benefits, and company car details
  • records of amounts of PAYE, SLDs, NICs and subcontractor deductions paid to HMRC
  • records of amounts of any CIS deductions set-off (Limited companies only) against the amounts paid to HMRC
  • any forms P46 you hold
  • records of payments you have made to subcontractors, whether gross or net depending upon the documentation held by the subcontractor.

We will only ask to look at records that we consider may be connected with the calculation of wages or payments to employees and subcontractors, or expenses payments and benefits provided. The purpose of the review is to check that you have been operating matters properly. It is not a check on your business accounts or personal tax.

We will tell you of any further enquiries we intend to make, as far as we can, once we have seen all the relevant records.

Providing information

We will ask questions and explain what further information we need as clearly and simply as possible.

We will take up as little of your time as possible by trying to ask early on in our review for everything that we need to know. We will try to avoid asking for information in a piecemeal way, but this is not always possible as one question may lead to another. It may help if you tell us about any special features of your business, which you think may be relevant to any questions we have asked.

You and your employees do not have to answer any questions and you may want to consult your professional adviser before replying, but you are the people who know how your records have been kept and what payments have been made, so helping us can speed things up.

We will give you a reasonable amount of time to provide any information we need. You should tell us if you think we have not given you enough time to provide information, and say how much more time you need, and why. We will let you have more time if this seems reasonable. If we cannot agree we will tell you why.

We will give you every opportunity to give us all the information we need to settle matters and to explain any apparent mistakes in your records. If we can agree with your explanations we will close that line of enquiry, but if we cannot we will tell you why.

You should respond as promptly as you can when we ask for information. This will help to keep down your time and costs and ours. You have the right to ask us why we are continuing our enquiries if you believe that

  • you have provided all the information and explanations necessary to check your records, and
  • we have had adequate time to consider the information and explanations.

We will reconsider the matter to see whether we can agree or explain what further information we need to check your records.

You should tell us straightaway if you have difficulty obtaining the information we have asked for and we will discuss with you how you might obtain it. You should also tell us if you think it is not relevant to the review. We will consider your reasons carefully and if we still think we need the information we will tell you why.

 The information you provide should be correct to the best of your knowledge. If you provide information you know to be false, you could be liable to prosecution.

If you do not provide the information we have asked for and we have to use our statutory powers to obtain it from you, we will

  • explain our statutory powers to you
  • advise you of any penalties that might arise if you do not comply, and
  • tell you about your right of appeal to independent Appeal Commissioners.

Borrowing your records

We may need to borrow some or all of your records if we need to look at them in more detail. If we do take away some or all of your records we will

  • explain why we need them
  • give you a receipt
  • keep them safely and return them to you as soon as we can.

If you need them at any time you may ask for them back. If we need to keep them longer we will give you copies of any documents you need

  • free of charge, and
  • within seven days of receiving your request.

If nothing is wrong

A review does not necessarily mean that we think you are doing something wrong. Many reviews show that nothing is wrong and the matter ends there.

If something is wrong

If we find something wrong, or we think your records are inadequate, we will

  • explain the problem and recommend how you can put it right for the future, and
  • follow up this advice with a letter setting out what we have said.

How do you correct mistakes?

If you have not paid the right amount of PAYE, SLDs, NICs, statutory payments or tax credits in the current tax year, we will tell you how to correct your records.

If the records we examine are not adequate, we will tell you what you need to do. If you are professionally represented we may suggest that you seek advice from your professional adviser.

If you have paid too much in a past tax year, we will tell you how to claim a refund.

If we find that you have underpaid in a past tax year we will give you a detailed computation setting out the amount we consider you should pay, together with any interest due to date. We will only include figures that we consider to be reasonable based on information we have.

We will generally only seek to recover money for up to six years prior to the year in which our review starts.

You should ask us to answer any questions you may have or to explain if you do not understand any figures on which the computation is based.

Penalties

We will seek a penalty when we believe one is due and will tell you why we think it is due.

When we calculate any penalty we will normally take into account

  • the extent to which you have disclosed voluntarily anything that was wrong
  • your help in concluding our enquiries and the seriousness of any errors or omissions.

The way we work out a penalty is set out in our leaflet IR109 'Employer compliance reviews and negotiations'.

You should tell us about any matters you think relevant when we are working out the penalty we believe is due.

Agreeing the amount due

We will try to agree with you all the figures we put forward and you will have the opportunity to discuss them with us. You may consult your professional adviser before you agree any figures.

Once we have agreed the amount due, we will discuss with you how and where to pay it. If you have financial difficulties which mean you cannot pay, you should tell us as soon as possible.

There is further guidance on how liabilities and settlements are negotiated in our leaflet IR109 'Employer compliance reviews and negotiations'.

If we cannot agree the amount due

Most reviews are settled by agreement. If we cannot agree, we may make a formal determination for the tax underpaid, SLDs, excess tax credit funding and penalties. We will issue a notice of decision for the NICs and statutory payments.  

You can appeal to independent Appeal Commissioners against any determination or notice of decision we make if you think it is wrong. You will have 30 days to do so.

You can find out how to make an appeal by

  • reading the notes issued with the determination or notice of decision
  • asking us to explain the process to you.

Appeal hearings

We will try, wherever possible, to reach agreement with you about the amount due without the need for a formal hearing of any appeal.

If we cannot reach agreement, you have the right to ask for any appeals to be heard by the Commissioners. We will arrange for this to be done or, if you prefer, you can contact the Clerk to the Commissioners yourself. We will give you the Clerk's address if you ask for it.

If the appeal hearing has been arranged at your request and we think we will need more time to conclude our enquiries, we will ask the Commissioners to adjourn the hearing to a later date. It will be up to them to decide whether to do so.

We may ask the Commissioners to hear your appeal if there is little or no progress being made towards settling it by agreement.

If the appeal hearing has been arranged at our request and you need more time to provide information, you may ask the Commissioners to adjourn the hearing to a later date. It will be up to them to decide whether to do so.

We will tell you if we intend to ask the Commissioners to settle your appeal. We will explain the figures we propose to put forward at least 14 days before the date fixed for the hearing, unless there are exceptional circumstances.

You have the right to put your case to the Commissioners and to tell them the figures you believe to be correct.

You can choose whether or not to have your case presented for you by a professional adviser or by any other person, providing the Commissioners do not object.

After listening to both parties and considering all the evidence, the Commissioners will decide whether the determination or notice of decision should remain unchanged, be increased or be reduced.

You may ask us or, if you prefer, the Clerk to the Commissioners, if there is anything about the appeal hearing procedure which you do not understand or feel you need to know.

There is more information about appeals in our leaflet IR109 'Employer compliance reviews and negotiations'.

At the end of our review

After a short period of time, we may contact you again, to confirm you understand any advice given and to offer further help if you require it.

If you have any problems or questions that have not been resolved during our review please

  • ask the officer for help
  • contact any HMRC Enquiry Centre, or
  • ask your professional adviser.

Our staff will be pleased to help you. They can also give you any of the other leaflets we have mentioned.

Your rights under Our Service Commitment to you

During the review

We will

  • always be courteous, fair and professional in our dealings with you
  • deal promptly with your questions and any letters from you or your professional adviser - usually within our national target for correspondence (see HMRC's Charters for more details).

If we cannot reply quickly, for instance, because of the amount or complexity of the material you have sent us, we will tell you the reason for the delay and tell you, if possible, when you can expect a reply.

Keeping you informed

We will explain your legal rights and the reasons for any actions we take as the review proceeds. We will tell you, for example, why we

  • need to see certain records
  • need information or explanation from you or your staff
  • need to borrow any records
  • think we need to see you again
  • are not satisfied with any explanation you may have given
  • propose to settle matters in a certain way.

You can ask us at any time to explain

  • your rights
  • why we have taken a particular action or
  • what you are obliged to do under the law.

You may ask for these explanations even if we have already given them to your professional adviser.

Confidentiality

You have the right to the confidentiality which all taxpayers receive.

We will only talk to members of your staff who have made entries in your records about matters which are relevant to our review. We will not normally wish to talk to other staff during the visit to your premises, but if we do we will ask your permission first.

Only in the limited circumstances allowed by law (such as Appeal Commissioners' Hearings) will we give information to people you have not authorised.

Your costs

We know that dealing with our questions may cost you time and money, so we will only ask for information we reasonably require to check that you are operating the system correctly.

We will end the review as soon as possible, that is, when we are satisfied that any errors or omissions involving more than a trivial amount of tax and / or NICs has been identified and put right.

If you feel we have made a mistake please let us know. We will try to put right our mistakes as soon as possible.

Our fact sheet 'Complaints and putting things right' C/FS tells you what you should do if you are unhappy with the service or the way we have treat you.

Complaints

Please tell us if you believe

  • you have been denied your rights
  • we have made a mistake
  • you have been treated badly
  • we have not acted in accordance with this Code Of Practice.

To help you to do this and to avoid any further inconvenience, we have a straightforward and easy to use complaints procedure.

You can complain in writing, by phone or fax, or by visiting your local office. We will try to settle your complaint as quickly as possible. So if you have a complaint, please follow the steps below.

Step one

When you have a complaint, it is usually best to contact the person you have been dealing with. You may, however, prefer to contact the person's immediate manager or the person in charge of the office. If you wish to do this, phone the Customer Relations Manager and they will tell you who to contact.

Step two

If you cannot settle your complaint at step one, contact the Director with overall responsibility for the office you deal with. We will tell you the name and address of the Director to contact. The Director will review the complaint objectively.

Step three

If you are not happy with the Director's response, you can ask the Adjudicator to look into your complaint. The Adjudicator is a fair and unbiased referee whose recommendations are independent.

You can contact the Adjudicator at

The Adjudicator's Office
Haymarket House
28 Haymarket
London
SW1Y 4SP

Tel 020 7930 2292 (Typetalk facilities are available)
Fax 020 7930 2298

You can also contact the Adjudicator

The Adjudicator's Office leaflet AO1 (available from the Adjudicator's Office and HMRC offices and Enquiry Centres) tells you how to make a complaint and gives information on what the Adjudicator can look into.

If at any time you are not satisfied with the service you are receiving from us or from the Adjudicator, or with the handling of your complaint, you can ask an MP to refer your case to the Parliamentary Ombudsman. The Ombudsman will accept referrals from any MP, but you should approach your own MP first.

Further information is available from

The Parliamentary Commissioner for Administration
Millbank Tower
Millbank
London
SW1P 4QP

Helpline 0845 015 4033
Fax 020 7217 4000

Or contact the Parliamentary Ombudsman

You can also ask your MP to take up your case with HMRC or Treasury Ministers.

Help us to improve our service

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

If you would like to suggest any changes to the way we do things, or if you have any comments about this Code of Practice, please write to us at this address:

HM Revenue & Customs
Tax Administration Advice (Stockport)
7th Floor
Wellesley House
30 Wellington Road North
Stockport
SK4 1EZ

Further Information

When our offices are closed, you can get general advice on Self Assessment by calling our Helpline, in the evenings or at weekends on 0845 9000 444.

HM Revenue & Customs commitment

We aim to provide a high quality service with guidance that is simple, clear and accurate.

We will

  • be professional and helpful
  • act with integrity and fairness, and
  • treat your affairs in strict confidence within the law.

We aim to handle your affairs promptly and accurately so that you receive or pay only the right amount due.

Putting things right

If you are not satisfied with our service, please let the person dealing with your affairs know what is wrong. We will work as quickly as possible to put things right and settle your complaint.

If you are still unhappy, ask for your complaint to be referred to the Complaints Manager.

Customers with particular needs

We offer a range of facilities for customers with particular needs, including

  • wheelchair access to nearly all HMRC Enquiry Centres
  • help with filling in forms
  • for people with hearing difficulties
    • BT Typetalk
    • Induction loops.

We can also arrange additional support, such as

  • home visits, if you have limited mobility or caring responsibilities and cannot get to one of our Enquiry Centres
  • services of an interpreter
  • sign language interpretation
  • leaflets in large print, Braille and audio.

For complete details please

  • go online, or
  • contact us. You will find us in The Phone Book under HM Revenue & Customs.

These notes are for guidance only and reflect the position at the time of writing. They do not affect any right of appeal.

Issued by
HM Revenue & Customs Printed Guidance
November 2007
© Crown Copyright 2007