Receiving a visit from the tax inspector is a stressful experience for any business owner, even if their accounts are up to date and in order.
And with HM Revenue and Customs (HMRC) now piloting a new inspection process in the SME sector, small businesses will have to be more prepared than ever before.
The Single Compliance Process (SCP) is a new procedure that is designed to simplify and standardise checks to improve taxpayers' experience of inspections and to reduce costs.
Not to be confused with Business Records Checks - another HMRC pilot started fairly recently - the SCP will involve a uniform procedure for dealing with a tax enquiry from start to finish and will combine the examination of VAT, Income Tax, Corporation Tax and PAYE into a single visit, as opposed to the previous practice of carrying out multiple inspections.
Whilst this is aimed at reducing the compliance burden on businesses, it also means that companies will have to keep a closer eye on their accounts and ensure that all tax affairs are up to date. It is likely that more in-depth questioning will be involved, but with the right advice and support from an accountant who can help with preparations prior to the inspection and even provide support on the day of the visit, business owners shouldn't find it too harrowing an experience.
During an inspection, HMRC will evaluate the risks involved and consider the best method of approach in order to ensure that its resources are applied in the most appropriate way.
The new framework will comprise four different levels of intensity:
1. The first level will work cases remotely, as is currently the approach with some Income Tax and Corporation Tax Enquiries.
2. The second level will look at a simplified and faster route for those cases where there are not many risks but a face-to-face intervention approach is required. This is similar to the current Employer Compliance visits.
3. The third level addresses cases showing more in depth risks and behaviour short of evasion.
4. The fourth level will tackle cases indicating incidences of tax evasion.
The intention is that as a business is assessed, it should be able to move between each of the four levels, depending on what is encountered as the enquiry progresses. This should reduce any perceptions of tax inspectors ‘fishing' for discrepancies and is meant to keep business owners' stress levels to a minimum.
The SCP six-month pilot scheme began in June across several locations in the UK - Edinburgh/Dundee, Reading/Slough, Newcastle, Warrington, York, Exeter, London Euston, Southampton, Cardiff and Belfast.
If successful, a national approach will be actioned from January 2012, initially within the SME sector but with plans to roll it out for other taxpayers too.
Having been involved in an ongoing tax enquiry for a client that began four years ago, I am hopeful that the SCP will put an end to such prolonged enquiries, causing minimal disruption to business owners and their companies. Whilst the SCP may initially seem a daunting and even more intrusive procedure for businesses that are used to the ‘one-at-a-time' approach to their tax affairs, having an accountant to guide them through the process should render it as painless as possible.
For further information about Acumen, contact 01224 573904 or visit www.acumen.info
Andy Bain, Senior Tax Manager
Acumen Accountants and Advisors
