TALKING SHOP
The Martini Taxman T
JOHN WHITING
hose of a certain age will recall the words “anytime, anyplace, anywhere”. That was the selling point for Martini; it also describes the new powers regime HM Revenue and Customs
will have from April 2009. The changes follow a major review of the whole area of powers, deterrents and safeguards surrounding the tax system following the merger of HM Customs & Excise with the Inland Revenue in 2005.
The Taxman Needs Powers The taxman in any country needs powers with which to run the tax system. If taxpaying was voluntary, most of us would 'volunteer out'. It is often noted that taxes are the price we all pay for living in a civilised society; having powers available to the taxman means that mechanisms are there to ensure that those enjoying the benefits of civilisation pay appropriately, according to the rules. In simple terms, this means that laws have to be laid
down to prescribe how the various taxes are to be calculated, when they are to be paid and what happens if those due to pay their taxes don't meet their obligations. The most obvious consequence is some form of financial penalty for a taxpayer's failure and, indeed, the penalties available to HMRC are changing significantly from April 2009. But as well as financial penalties, the taxman needs
powers to check what we are all are doing and to confirm that we have actually paid the right amount of tax based on our actual activities. The taxman's powers have always included the ability to ask questions. That will very much still exist. But beyond the gentle enquiry comes the understandable need to have powers to look at the taxpayer's records, visit them and to do so on a timely basis. It is these aspects that are being refined, extended and modernised.
But Why Now? The changes to HMRC's powers came about through a major review of the whole area of powers, deterrents and safeguards surrounding the tax system following the merger of HM Customs & Excise with the Inland Revenue in 2005.
Now back to the Martini:
Anything …? The taxman already has wide powers to see and seek information and to inspect your records and documents. This is nothing new, but whereas the tendency in the past was for such powers to be used as
12 • FOOTWEAR TODAY •MAY 2009
an enquiry went along, under the new rules there doesn't have to be that starting point of a formal enquiry. It's going to be quite possible for the taxman to ask you for things entirely separate from any investigation of a specific tax return. And if there is an enquiry, that may well be via a phone call or even by email. It's also worth noting that there will be a power to
get information from someone other than you as the taxpayer. There are immediate safeguards here in that the approach to the third party must be with your agreement or must be formally sanctioned by higher authorities within HMRC. If a third party is approached for information/documents, then you must be told of what is going on. Apart from documents protected by legal
professional privilege, the taxman can get at any of your document. That is not to say that an approach from HMRC asking for documents means that you simply hand over everything: your initial response must always be to clarify what is wanted, why HMRC are seeking it and to ensure that they are being reasonable in both their request and their timescale for complying with it. A key safeguard throughout these powers is that they have to be used 'reasonably'.
Anyplace …? In connection with their work HMRC have to be able to visit business premises. They need to be able to check on the tax liabilities that involve things such as valuing stock that might be on hand or checking your books for VAT purposes. Whilst they have always had visiting rights, particularly for indirect taxes, their powers are being ‘levelled up’: visits will be easier for them to arrange. If the taxman does want to visit you, then it's
perfectly in order to ask why and to see if there is an alternative way of meeting their needs. It may in fact be quite sensible and efficient for them to come and visit; but equally it may cause disruption and opting instead for a meeting at a mutually convenient time may well suit everyone. One key safeguard that was added to the legislation
during its passage through Parliament is that premises that are used wholly as ‘dwellings’ – your home - cannot be visited. However, thousands of people who are self-employed or run a small business operate out of their own home. In principle that does seem to render some part of their home liable to a visit but HMRC have stressed throughout that they want to use the powers sensibly and appropriately so would want to visit in such circumstances by agreement.
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