An Inspector Calls – Will You Be Ready?

HMRC are increasingly concentrating resources on areas that yield the highest amounts of cash, and we have seen a marked increase in the number of PAYE inspection visits in recent years.  Employers can expect a visit every 6 years, “higher risk” companies more frequently.   

When HMRC calls they expect to see a variety of documents including payroll records, expenses claims, mileage records, credit card statements, cashbook/petty cash, and contracts for “self-employed” workers.  They look for situations where PAYE & NIC should have been operated or a benefit reported, and usually errors arise because the employer hasn’t understood the notoriously complex rules.

Errors can be very expensive.  HMRC would look to collect earlier years’ liabilities, interest and penalties.  Examples of common errors include:

• Private petrol provided
• Meal expenses
• Home to work travel being paid for
• “Self-employed” workers who HMRC consider are employees
• Casual labour
• Entertaining
• Lump sum expenses
• Trips for purposes other than purely business
• Clothing provision
• Medical expenses

The inspection process can be arduous, and professional representation is strongly recommended.  Prevention is better than cure, and it may be worthwhile reviewing procedures to identify problem areas and correcting them, before the inevitable visit.

Andrew Cowe, Tax Manager, Brearley & Co