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HMRC internal manual

Compliance Handbook

Information & Inspection Powers: Conditions and safeguards: What we can require or inspect: When can the powers be used

Information and inspection powers can be used at any time provided that the information or inspection is reasonably required for the purpose of checking a tax position.

Checks normally address a perceived risk to the accuracy of a return. However there is no requirement

  • that a risk must exist before a check can be carried out, see CH21200 about random checks, or
  • that a tax return has been made before we carry out a check.

It might be appropriate, for a variety of reasons, to conduct a check before a tax return has been made. For example, not every person is required to make a return. We can check and, if necessary, correct their tax position without putting them to the trouble of making a tax return and self-assessment.

Other occasions where information and inspection powers might be used before we receive tax returns could include

  • VAT assurance
  • PAYE checks
  • ensuring that statutory records, see CH21700, are being kept where either no agent is acting or the agent reports a continuing failure to keep records
  • checking tax systems and processes in operation so that past and future compliance can be understood
  • identifying, and quantifying the liability of, ‘ghosts’ and ‘moonlighters’, see below
  • monitoring compliance with conditions for suspension of penalties
  • cases where we suspect fraud
  • establishing details about tax avoidance schemes, and
  • following up an issue identified in a VAT, PAYE or NICs check which is relevant to income tax, capital gains tax or corporation tax.

‘Ghosts’ are persons who are economically active but who have not made themselves known to us.

‘Moonlighters’ are persons we know about in respect of one or more sources of income but who have another source of income that they haven’t told us about.

Note that if your compliance check is into an excise duty, you will use powers under CEMA79. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)