Changes to how HM Revenue & Customs carries out compliance checks from 1 April 2009

The way HM Revenue & Customs (HMRC) carries out compliance checks (also known as enquiries, visits and inspections) will change from 1 April 2009. These changes will affect how we manage compliance checks for:

  • Income Tax
  • Capital Gains Tax
  • VAT
  • PAYE
  • the Construction Industry Scheme
  • Corporation Tax

The new compliance checks legislation is designed to make the tax system simpler and more consistent.

From 1 April 2009, HMRC will have one set of powers covering PAYE, VAT, Income Tax, Capital Gains Tax, Corporation Tax and Construction Industry Scheme to:

  • visit businesses to inspect premises, assets and records
  • ask taxpayers and third parties for more Information and documents

These powers are provided by Schedule 36 of the Finance Act 2008.

The new legislation will also provide:

  • important safeguards for customers
  • greater flexibility in setting record-keeping requirements after 1 April 2009
  • new time limits for assessment and claims which will not be fully in force until April 2010 - but there will be some transitional arrangements from 1 April 2009

The time limit changes mean that the deadlines SA and PAYE taxpayers have to make tax claims are changing. Please check the deadlines and what you need to do to make a claim.

These measures are provided by Schedule 37 and Schedule 39 of the Finance Act 2008.

Find out how the changes will affect you

We have published our learning to help you understand the measures brought in by the Finance Act 2008 and how these will change the way HMRC officers check the tax position of individuals, companies and VAT-registered bodies.

Use the new compliance checks e-learning package – (provides an overview of the new framework and takes about half an hour to complete)

Use the compliance checks e-learning module for information powers - (explains how HMRC can obtain information and documents and takes about three hours to complete)

Use the compliance checks e-learning module for inspection powers (explains how the inspection powers are used and takes about one hour to complete)

Use the compliance checks e-learning module for penalties under Schedule 36 FA08 (explains the penalties which HMRC can charge and takes about one hour to complete)

Legislative changes at a glance

The new legislation provides HMRC with:

  • one set of powers to inspect business records, assets and premises
  • the ability to see statutory business records without a right of appeal
  • the ability to look at records for PAYE, Income Tax, the Construction Industry Scheme, Capital Gains Tax and Corporation Tax during the tax year before a return has been submitted
  • a new power to correct obvious errors in a tax return based on information held by HMRC
  • a single approach across all taxes to asking taxpayers and third parties for supplementary information, based on formal information notices with a right of appeal

The legislation also makes some changes to the way HMRC must carry out compliance checks, including

  • a new four-year time limit for assessments and claims - a reduction from six years for Income Tax, Capital Gains Tax and Corporation Tax and an increase from three years for VAT
  • reductions in extended assessment time limits
  • a streamlined process for closing Corporation Tax assessments
  • a new statutory ban on inspecting purely private dwellings without consent
  • a statutory requirement for HMRC to give at least seven days prior notice of a visit, unless either an unannounced visit is necessary, or a shorter period is agreed
  • a new requirement that unannounced visits must be approved beforehand by a specially trained HMRC officer
  • a statutory requirement on HMRC to act reasonably

Information for tax agents and advisers

You can find out more about managing compliance checks, penalties and appeals in the Tax agents and advisers area of the HMRC website.

Technical and operational guidance for new compliance checks framework

Handling penalties, enquiries, appeals and tribunals for your clients

Update to the regional Working Together events - Finance Act 2008 - compliance checks

More useful links

We have published frequently asked questions on the new compliance checks framework introduced by Schedules 36, 37 and 39 of Finance Act, 2008.

New Compliance Checks

You can download a summary of the responses the Government received to its consultation document on A New Approach to Compliance Checks published on 17 May 2007. It is an extract from the new consultation document Modernising Powers, Deterrents and Safeguards.

Summary of responses: A New Approach to Compliance Checks

A further consultation, impact assessment and draft legislation are also available.

Compliance Checks: The Next Stage

If have any queries or comments please email New Compliance

For more information about the new compliance checks please see the compliance checks fact sheets.

Find out how you can take care to avoid a penalty