HMRC to standardise compliance process for small firms

HM Revenue & Customs has given the go-ahead to roll out nationally a new framework under which the bulk of small and medium-sized business compliance checks will in future be undertaken.

Floated as a way to reduce the burden on businesses while increasing its officers’ efficiency, HMRC’s Single Compliance Process will be used for both single tax and cross-tax enquiries into SMEs.

The process, which underwent what HMRC sees as a successful trial that ended in March, will not be applied in Local Compliance Fraud Cases or the Contractual Disclosure Facility, nor will it apply in certain types of avoidance cases.

But SCP will focus on the “risks or behaviours” Revenue officers identify using three separate approaches:

Firstly, “desk-based”, for cases that can be worked by correspondence or over the phone; “visits”, for cases that require a face-to-face meeting and thirdly, “evasion,” for cases that require “evasion approaches” from the outset, such as surveillance or unannounced visits.

Through this three-tiered approach, direct tax enquiries conclude more quickly; some VAT visits show scope for being carried out as ‘desk-based’ cases, and, in the main, both accountants and taxpayers report a better experience of HMRC’s activity.

Such were the findings from SCP’s trial, according to an online update from HMRC, which has noted the elements it believes explain the improvement, to both processing times and taxpayers’ experience.

As a result, Revenue compliance staff approaching an SME should emphasise ‘early and open dialogue’; promote “collaborative working” with taxpayer or their accountant and, where necessary, conduct on-site reviews of business records.

Among advisers to taxpayers and businesses, the reaction to HMRC’s move – and its specifying of its new compliance approach - is supportive yet cautious. The Association of Tax Technicians, whose members provide accountancy services, explained:  

“Provided the process delivers the expected mutual benefit of quicker resolution to tax enquiries and continues to enjoy the same level of satisfaction that was expressed by taxpayers and agents during the trials, it has to be the right decision.”

ATT's president Yvette Nunn added: “It is in everyone’s interest to have a process for business tax enquiries that enables speedy and fair resolution. For whatever reason, far too many HMRC enquiries have in the past taken too long to resolve. That is inefficient for HMRC and can really distract business owners from getting on with what they are meant to be doing – running their businesses.“

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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