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HMRC internal manual

Compliance Handbook

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HM Revenue & Customs
Updated
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How to do a compliance check: starting a compliance check: cross-tax working

Benefits of cross tax working
Cross tax cases
Carrying out cross tax compliance checks with other caseworkers
Appropriate use of powers
Other considerations
Evasion
Publishing the Details of Deliberate Defaulters
Updating caseflow

The information and inspection powers provided by FA08/Sch36 and CEMA79 enable HMRC to coordinate and combine compliance checks into different taxes when it is the quickest and most efficient way to address risks.

The powers in FA08/Sch36 are used to check a person’s tax position, see CH20150.

The powers in CEMA79 are for protecting, securing, collecting and managing the revenues derived from duties of excise.(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Benefits of cross tax working

The benefits of cross tax working can include:

  • pooling of risk information and expertise
  • allowing a whole view of the person, including any reasonable adjustments required if they have a disability
  • joint meetings
  • joint inspections
  • coordinated requests for information
  • comprehensive evidence upon which to judge behaviour for penalty purposes
  • combined PLR for the purposes of identifying suitable cases for Publishing the Details of Deliberate Defaulters, see CH500400.

Cross tax cases

There are several origins for a cross tax case:

  • RIS identify other tax risks in the Standard Intelligence Package (SIP)
  • you identify a cross tax risk during your compliance check
  • another caseworker identifies a risk during their compliance check.

RIS identified cross tax risk

RIS does not routinely look at risks across other taxes.

RIS works with stakeholders to create a Project Document (PD) and, if specified in the PD, they will identify other tax risks in the SIP.

This also applies to Task Force cases. Most Task Forces are worked across taxes but some may be tax head specific.

At the start of the cross tax compliance check you must send the person the appropriate cross tax letter.

Cross tax risks identified during your compliance check

While working your case, you should consider the potential benefits of extending a single tax compliance check into other tax regimes. Discuss it with your line manager or team leader if appropriate.

If you identify a risk that is outside your tax regime or area of expertise you should discuss it with your manager and local contact for the other tax regime and agree which team to assign the risk to.

You do not need to involve RIS unless you want them to provide further information, in which case you should contact them using the RIS information request process.

If you decide not to assign the risk to another team or cover it yourself you should consider a cross tax referral via RIS.

Cross tax cases from another caseworker

You may receive a risk via your manager from another tax, where that caseworker has identified a cross tax risk. For example, during a compliance check, a VAT caseworker decides there is also an Income Tax risk.

Carrying out cross tax compliance checks with other caseworkers

When cross tax risks are identified you should hold a case conference with all the caseworkers across the taxes who will be working the case with you to plan the compliance check.

Appropriate use of powers

If you are visiting or meeting a person with compliance caseworkers from other disciplines you must explain clearly to the person and any agents:

  • who you are
  • which taxes or duties you are asking the person about
  • under what legislation you are acting.

You must work within the appropriate legal powers and observe the safeguards in place to ensure you act reasonably and proportionately.

You must only use the information and inspection powers that are relevant to the tax or duty being checked, see CH201100. For example, you cannot use powers under CEMA79 when checking a person’s VAT position.

If you are looking at excise duties as well as the taxes covered by Schedule 36 you must make this clear at the start of the visit and issue the factsheet CC/FS16 Excise visits once you have entered the premises, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

You do not need agreement from an authorised officer for an unannounced visit under CEMA. If you carry out an unannounced visit under CEMA powers to tackle the trade in illicit excise goods under the Alcohol and Tobacco Strategy and would like to continue your visit to carry out a compliance check into CT, IT or VAT you must have agreement from an authorised officer CH254020 or Tribunal see CH25540 to do so.

When you arrive give the occupier of the premises a written notice of inspection, see CH254030.

Other considerations

You must not attempt to address any tax risks in regimes where you do not have the required knowledge and training. For example, during a VAT assurance visit you must not attempt to address any specific and/or technical Income Tax risks, unless you are trained to do so. Use the liaison and referral processes in place within your business area so that the Income Tax (IT) risk can be addressed.

IT and CT officers need to ensure they ask their VAT colleagues to review earlier years unless they can use discovery. In the early stages they may not have broken the records for the enquiry year and may not have the power at that stage to review earlier records.

You should be aware of the record keeping requirements for the taxes you are checking see CH10100 and Excise Notice 206 for revenue traders’ records.

Evasion

Spotting potential evasion is a core component of any compliance check irrespective of the particular tax risks.

You should carry out credibility checks taking into account the viability of the business as a whole including the income of the directors or partners or sole proprietors and whether it is adequate to support the observed lifestyle. Where the declared income does not look credible you should challenge the taxpayer and should not confine your checks to the specific VAT risks identified at the beginning of the compliance check.

For example, you may be checking the VAT returns of a business with a low turnover and profit where the director drives a very expensive car. You should ask the director how he funds this and whether he has other sources of income.

During a compliance check if you suspect that a person has evaded any of the taxes collected by HMRC, you must consider whether you need to make an evasion referral.

For example, if you are carrying out a VAT check and suspect the person may have evaded income tax you must consider the evasion referral criteria, see CH402170, and follow the evasion referral process if required, see COG221075.

Publishing the Details of Deliberate Defaulters

The tax yield can be broken down on Caseflow into the different taxes and each tax will require a separate PDAC. The combined PLR may not trigger an automatic referral for Publishing the Details of Deliberate Defaulters. You must consider the combined PLR for the purpose of identifying suitable cases, see CH500400.

Updating caseflow

Managers should make sure the cross tax risks are opened on Caseflow and allocated to an appropriate caseworker.

The manager of the lead tax should review the cross tax case and undertake any mandatory reviews. The managers of the other caseworkers will be able to review the case using the search function or access it via their caseworker’s risk but will not be able to record a case review.

There will always be a case owner within Caseflow. This will be the person dealing with the tax risks for the lead tax. If the case owner identifies further risks they can assign them to another caseworker as a task. Once the risk has been addressed the risk can be closed and any yield claimed. Caseworkers no longer need to return the task to the case owner. Until that stage both caseworkers will be able to update activity and risks on Caseflow.

Any scanned post will only show against the case owner. The case owner should make sure any other case workers receive any post relevant to their risks.