Power to sanction
>While any extenuating circumstances should be considered by the officer, there is likely to be little sympathy for businesses which failed to behave properly.
HMRC will check claims and where there are areas for concern, they will use the sanctions available.
To be sure, there are safeguards that allow businesses to ask for an independent tribunal.
These tribunals can consider appeals against formal notices of assessment for incorrect claims.
But the costs of dealing with such formal procedures in terms of time and professional costs are significant.
The simplest and best advice is to ensure that the claims records are completed contemporaneously and stored for the statutory six years.
In cases where it is necessary to reconstruct records, it is better to make this clear from the start rather than wait to see if HMRC notices and asks questions.
Business owners should be aware that compliance officers are trained to look for inconsistencies and would consider this to be an indicator that the claims are not correct.
These inconsistencies would not necessarily be enough on their own for officers to seek remedial action or prosecution.
But HMRC may already have other information that the claims may not be correct or suspect.
Negotiation option
If records were presented as written at the time of the claim, and which were then found to have been completed later, HMRC officers might conclude that something more sinister was indicated.
If problems do arise it is rarely too late to seek specialist advice. Disputes can result from a misunderstanding or communication problem.
Independent advisers can often present the facts so that a resolution can be reached, and the compliance check concluded.
Where problems have been uncovered by HMRC, it is best practice to deal with this immediately to minimise the business’s exposure to the tax charge and penalties.
A pragmatic solution can often be found through careful negotiation.
HMRC estimates that the vast majority of claims will be correct.
Nonetheless, business owners with a compliance check looming should be aware this does generally indicate HMRC has reasons for the review.
It should not be thought HMRC compliance officers randomly check claims - most checks follow a risk assessment which has revealed sufficient risks to justify the follow-up visit.
On the bright side, it is important for business owners to be reassured that a risk assessment process merely identifies potential risks and is not in itself evidence that something is wrong.
A neutral, fact-finding approach should be adopted by HMRC to establish whether the risks identified are real or not.
Fears of being a target
With all the publicity around the calls to the fraud hotline, businesses may be concerned that they might have been reported by a whistle-blower or even by someone with a grudge against them.
