UK Businesses face surprise tax raids

Businesses face surprise raids from tax inspectors suspicious about their affairs, under proposed new powers for Revenue & Customs. Read original article

Officials are seeking rights to enter business premises and examine goods and records as part of investigations into corporation tax liability, according to a consultation paper published on Thursday that advisers warn could impose extra burdens on small businesses.

Private residencies could also be visited by officials wanting to inspect business assets or stock kept on the premises.

Tax officials could also pay visits to personal taxpayers, in cases where they have failed to provide requested information. The consultation document said this would be an option "especially in cases where understanding of tax may be limited".

The consultation paper will fuel concerns that Revenue & Customs, which was created in a merger two years ago, wants to extend the substantial powers enjoyed by Customs officials to officials dealing with direct tax.

A decision to give the power of arrest to some direct tax officers has already sparked controversy.

The alignment of powers has been a sensitive issue because of accusations that Revenue & Customs has become more aggressive since its merger. But Revenue & Customs has promised to introduce clear safeguards, issuing a consultation paper on Thursday to examine the "adequacy and effectiveness" of existing measures.

John Whiting of the Chartered Institute of Taxation said he welcomed the tone of the consultations, which appeared genuinely to acknowledge the need for safeguards.

In the document, Revenue sought to reassure business that wherever possible they would address concerns through correspondence and telephone discussions.

But it justified its move to give corporation tax inspectors the same right to enter premises as VAT inspectors on the grounds it would make it easier to agree accurate figures.

Revenue & Customs said its officers needed "to obtain a first-hand impression of the business and how it operates" properly to check the accuracy of tax returns.

Although visits to businesses would normally be arranged in advance, an element of surprise was needed in cases where "the taxpayer might decamp, or stock or other assets might be removed, or employees laid off or relocated or business records cosmetically tidied up for the occasion", the consultation document said.

It said the proposed new power would give officials the right to walk around premises and examine goods in packaging cases, but it would not extend to searching for documents. The rules would include details of which goods, if any, could be removed from the premises.

Tax specialists warned that extra visits from tax officials could be time-consuming and costly for small businesses, which would feel under pressure to have their tax adviser present to answer questions.

Richard Baron, head of taxation at the Institute of Directors, said the power to visit premises should be used very sparingly. "Having a heavy-handed official coming round could be a nuisance."

Chas Roy-Chowdhury of the Association of Chartered Certified Accountants said that large businesses would welcome a dialogue with Revenue & Customs, but smaller businesses would face extra costs from the visits.

"Smaller businesses do not have tax expertise in-house," he said. "They pay professional advisers by the hour."