Taxman gets ‘personal’ with checks

Practices with spotless record keeping have nothing to fear when the new Single Compliance Process (SCP) is introduced by the HMRC. For others, perhaps, it's time to scrutinise your accounts.

The SCP relates to the tax checks on small and medium enterprises (SME), which includes dental practices. The initiative was created because in 2010 the government demanded that checks were quicker, more efficient and got results. Specifically, an extra £7 billion a year in tax gathering by 2014/15.

SCP was trialled across 16 tax offices in May 2011, an activity that was extended by a year-and-a-half. And now, is set for wider release.

The initiative aims to simplify the process of investigating a tax return by determining the likely seriousness of the case – and the level of effort it will involve – in advance. Prior to the tax check, there is a 'risk' and 'behaviour' review, which involves an assessment of the business and the owner, and the outcome determines which level the case is allocated.

The review includes:

  • Checking accounts for current and previous years for inconsistencies or inaccuracies
  • Checking gross profit rate or hourly rate with comparable businesses
  • Serving issuing information notices for further data
  • Generating a 'personal lifestyle profile' on the practice owner, partners and directors, including analysis of social media updates

The behaviour assessment tries to establish the level of risk of deliberate tax evasion, measuring if errors were made 'despite reasonable care', 'carelessly' or 'deliberately'.

Once all the information has been gathered, the enquiry is placed into one of the following four levels: Level 1 – no meeting required to settle the issue; Level 2 – may necessitate a meeting in person; Level 3 – a further, in depth review is likely; Level 4 – detailed investigation into risk and behaviour outcomes due to suspicion of tax evasion.

Letters announcing the upcoming tax checks will describe in more detail what information is being sought, such as business expenses, to hasten the enquiry. Those who attend meetings in person will not be given meeting notes, which was not the case previously. There will also be inspections at the practice and principals will have to comply with officers' requests for information.

Cases thought to be higher risk will receive unannounced visits and/or other 'covert' activities.

Also, depending what they find during their review, the HMRC can refer cases to relevant teams, such as:

  • Deliberate Defaulters Management Unit
  • Tax Credit Office
  • National Minimum Wage Unit
  • National Insurance Record Updates Unit
  • Risk Intelligence Service
  • Construction Industry Scheme Functional Lead Team

For more information please visit or call Lansdell & Rose on 020 7376 9333.


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