HMRC - Compliance Check - Help...

[hyper]

hi,

 

i have recevied a letter from hmrc stating they are reviewing my 'income tax position' and wish to do a 'compliance check' ('make sure customers are paying right amount of tax and receving right allowance & tax relief') as i am listed as director on 2 company's.

 

the 1st company was already un the process of closing and the 2nd only opened a few months ago. all company accounts are upto date have been submitted & all tax payments to them have been paid.

 

however the letter states they wish to update thier records and confirm source's of income for upto the last 3 or so years.

 

I have never come across these type of checks and not sure why they would be doing this & not sure if thier is anything to watch out for.

 

has anyone else been through this ? what should i do?

Edited May 6, 2012 by hyper
update

[freakyleaky]

I've not heard of this either. I don't think you have anything to worry about as long as you are honest with them.

HMRC are desperately trying to collect revenue these days and seem to be coming up with all kinds of new tricks to catch you out.

If you have nothing to hide then you have nothing to worry about though.

[jadeybags]

Sounds like you'll be fine, although i'm not sure why they are targeting people that are registered with them. They should be starting to go through places like eBay & get in touch with the sellers on there that aren't registered with them. Like they do in USA, over there Paypal notifys their tax office when someone earns over a certain amount in sales. In my business I am not making enough yet to even pay tax, but there are numerous others been doing the same thing longer & fetching at least a couple of grand a month on there & not paying tax.

That does rile me.

[hyper]

thanks for the supportive feedback guys.

 

here are one of the lines on the letter

 

'we are undertaking review of your income tax position because you are currently director of 2 business's and according to record you ceased employment in x year. so therefore to update my records and ensure they are accurate pls confirm source of income since that date'.

 

i understand this really, i have updated them already, so not sure why they are doing this, and wonder if they are trying to catch me out, even though thier is nothing to catch.

 

just annoying cos naturally you begin to get worried and i have always filed all my accounts and any monies owed to them in good time.

 

 

just a little stressted and annoyed with them at the moment. ruined my weekend.

[Gbarbm]

I am afraid I can't give you the reason why you have been chosen for a review, but I can hazard a guess!

HMRC have many compliance projects on the go at the moment; one of them is directorships of close companies ( less than 5 directors and/or family run)

The reason for this project is that directors control the purse strings of the company and can manipulate those purse strings (not that I am for one second accusing you if this)

[freakyleaky]

Do sole traders come into this bracket?

[Gbarbm]

As I understand it, the OP is a director of a Ltd company.

Directors of Ltd Co. are classed as an employee of that company. The Ltd Co is a separate legal entity from the director.

Sole traders are in a different position. There us no separate legal entity from them.

If they go under they could end up losing everything.

The losses for a Ltd Co will be limited to the amounts that the directors put in to the company.

[hyper]

As I understand it, the OP is a director of a Ltd company.

Directors of Ltd Co. are classed as an employee of that company. The Ltd Co is a separate legal entity from the director.

Sole traders are in a different position. There us no separate legal entity from them.

If they go under they could end up losing everything.

The losses for a Ltd Co will be limited to the amounts that the directors put in to the company.

 

hi,

 

thanks for your response

 

so what would this mean for me then ? in laymans terms pls ?

 

Thanks

[hyper]

I am afraid I can't give you the reason why you have been chosen for a review, but I can hazard a guess!

HMRC have many compliance projects on the go at the moment; one of them is directorships of close companies ( less than 5 directors and/or family run)

The reason for this project is that directors control the purse strings of the company and can manipulate those purse strings (not that I am for one second accusing you if this)

 

Hi,

 

thanks for taking time to respond.

 

ok - but i have submitted all accounts for the business...and they would have access or able to obtain this information? or not? (i.e they already aware of the account information about the company, but want me to confirm it to them directly?)

[Gbarbm]

Basically, although you are an employee (because you are a director of a Ltd Co) you are in a unique position, unlike ordinary employees, whereby you are in a position to manipulate payments to the company such as a directors loan account, goodwill payments etc

Payments such as these may constitute wages but may not always have tax/NI deducted.

This is what HMRC are interested in; the question they ask themselves is this, is the payment a reward for services past, present or future and if they are then tax and NI should be deducted

[Gbarbm]

In answer to your second question, it is possible that some of the expenses/deductions might appear (to HMRC) to be non business related and they want to check to make sure.

[hyper]

ok I see what your saying, I spoke to the accoutant earlier as they are more in tune with this, so have got a appointment with them and will go through this. all the expense side of things are all backed up with the paper work, so if this is all this is about then it should be fine...I just hope they havent changed a rule and they are trying to catch me out on it.

 

thanks for your feedback guys. :-0)

 

In answer to your second question, it is possible that some of the expenses/deductions might appear (to HMRC) to be non business related and they want to check to make sure.

[Gbarbm]

Sometimes these checks are just random and mandatory so don't stress too much.

Im sure your accountant will go over everything at the meeting so if there are any issues he/she will be able to advise you on them.

[hyper]

Sometimes these checks are just random and mandatory so don't stress too much.

Im sure your accountant will go over everything at the meeting so if there are any issues he/she will be able to advise you on them.

 

Thanks very much Gbarbm you have been very helpful !

[Gbarbm]

You're welcome.

All the best with it; if you get chance, post back here with the outcome as it will be useful for future posters.

Kind regards

Gbarbm

[hyper]

hello again,

 

a little update so far,

 

I spoke to the accountant and they simply stated figures will need to be provided to the Tax Compliance team over the periods they have requested, this was confirmed and supplied to the Tax Compliance team.

 

A few weeks later, I received a response back from the Tax Compliance Team & they are now requesting

 

- actual amounts received for those periods

- employers reference

- bank statements for those periods

 

and they also state

 

'director will typically receive benefits in kind' ....

 

I am not sure if thier is some hidden agenda here at all....and what do they mean by employers ref & what a cheeky comment they made 'director will typically receive benefits in kind' thats a little out of order I thought....at the end of the day I am just a 1 man team & feel they are un-necessarily stressing me out.

 

im just putting together my bank statements...is their anything I should be weary about at all

& has anyone else gone through this ?

[Gbarbm]

Hi

Just supply the information they've asked for.

Make sure that all the items are business related and that you have receipts/invoices to back them up.

If you have put private items through the business then they should have been reimbursed; if that's not the case, then all you would need to do would be to disclose that to HMRC and pay the duties thereon.

I agree, the wording is a bit cheeky, there's no need for them to say it quite frankly!

[Gbarbm]

Regarding the employer ref, this refers to the PAYE reference.

Did you set up a PAYE ref for the company?

[kbaruin]

Hi

 

Can I have any update on your situation regarding the compliance check please....??

one of my friends received compliance check. We are not sure why this is sent to him as he does not own a company not he is a PAYE or contractor. He is on permanent role at a company and only earns one salary and no other household income. He pays tax promptly which is looked after by the employer who pays his salary. Donno why he was chosen for the complaince check as I assume the compliance checks are done for self-employed or a business.

 

your experiences and inputs will be of great help.

 

Thanks in anticipations

 

hi,

 

i have recevied a letter from hmrc stating they are reviewing my 'income tax position' and wish to do a 'compliance check' ('make sure customers are paying right amount of tax and receving right allowance & tax relief') as i am listed as director on 2 company's.

 

the 1st company was already un the process of closing and the 2nd only opened a few months ago. all company accounts are upto date have been submitted & all tax payments to them have been paid.

 

however the letter states they wish to update thier records and confirm source's of income for upto the last 3 or so years.

 

I have never come across these type of checks and not sure why they would be doing this & not sure if thier is anything to watch out for.

 

has anyone else been through this ? what should i do?

[freakyleaky]

An update on this thread would be really useful actually.

I will contact the op to see if there are any developments.