Under one Roof - merger of Revenue depts

Barry Hincks of Qdos Consulting looks at the implications of the forthcoming merger of the Inland Revenue and Customs and Excise.

Barry Hincks writes:

As you will be aware the Inland Revenue and H M Customs & Excise are in the process of merging to create a single Department that will go by the name of H M Revenue & Customs (HMRC). It will bring together direct and indirect taxes and be dealt with under one roof. Albeit the merger is to start from 1 April 2005, it cannot be done overnight and is likely to take a number of years until the two are fully integrated.

It is understood that the merger is not to result in any significant change to the current powers of either Department. An advice note is however to be produced (in draft format at present) advising on the new Department's legal powers and also on the approach officers are to adopt in the dealings with and the rights of taxpayers. An HMRC officer whether formerly an officer of Customs & Excise or the Inland Revenue will be able to use those powers that exist in respect of the specific tax they are looking at. There will be a common flow of information passed between the various disciplines.

Common questions that taxpayers will no doubt ask when dealing with HMRC will include:

When the HMRC contacts me, how will I know which tax/duty the enquiry is about?

The HMRC will always tell you specifically what tax, duty or tax credit they want information about. For example, they, as the different Departments do at present, will usually telephone you to say that they intend to visit to inspect your VAT, customs or excise records. If they intend to make an enquiry into your income or corporation tax return or tax credit entitlement they will tell you in writing. If you are still unclear about which tax, duty or tax credit their questions are about, you should contact them and ask for more information.

Will an officer I've been used to as someone who handles my income tax affairs, now contact me about my VAT?

All HMRC officers will in law be authorised to use all the HMRC powers. But initially officers of the former Customs & Excise will generally continue to deal with your VAT, Excise and Customs Duty matters, and officers of the former Inland Revenue will continue to handle your Income (including PAYE and NIC) and Corporation Tax and Tax Credits affairs. This said the HMRC will be piloting different ways of working, and this is likely to include some integrated or joint visits and enquiries.

If I am contacted about an intention to visit to inspect my VAT records, for example, will this visit extend to the inspection of my Income or Corporation Tax or Tax Credits affairs once you are on my premises?

The HMRC will only review the records relating to the tax, duty or tax credit they have told you they will be looking at. If they intend to review a number of taxes, duties or tax credits at the same time you will be told in advance. If in the course of their enquiry an officer of HMRC obtains information that is relevant to other areas of HMRC they may pass on that information for immediate or future follow-up action.

If an officer visits to inspect my VAT records, for example, will they be accompanied by an officer who wants to review records kept for PAYE and NICs, Income or Corporation Tax, or Tax Credits?

Such a visit will only be made where you have been told in advance, and you have agreed to the meeting covering the different taxes. It should be noted however that a single officer of HMRC may want to look at a number of taxes at one time, but if this is the intention once again you will be told in advance.

What happens if during the course of an inspection, you obtain information about a tax, duty or tax credit that is considered relevant to another?

The HMRC will always make it clear at the beginning of an inspection what tax etc they intend to ask questions about and they will only ask questions with regard to that. If other relevant information does come to light it shall be passed on for immediate or future action.

If the HMRC wants to look at records relating to more than one tax (e.g. VAT, and PAYE and NIC) will they try to co-ordinate the visits?

For example if the HMRC has phoned to make a VAT visit when they have already made a visit in respect of PAYE they should be advised of this. In such a situation they will attempt to co-ordinate their visits.

Will the above answers apply in all situations?

In the vast majority of cases the above will apply to all dealings with the HMRC. They will not however apply where they believe that a serious fraud may have been committed.

If you have any concerns in respect of the above please contact Qdos Consulting.

Barry Hincks bhincks@qdosconsulting.com

Qdos Consulting