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Follow on Google News | The Taxman Cometh [- possibly].Hard on the heels of recent moves by HMRC affecting several million PAYE taxpayers who had innocently believed that they’d already paid all the tax they were supposed to have paid...
By: Andrew Patterson Now on reflection those readers who’ve been in business for a long time [say twenty years or longer] might, however grudgingly, concede that they’ve seen a gradual decline in detailed scrutiny by various tax offices over that time. For example: anyone who ran a forecourt back in the 1980’s or 1990’s was quite used to seeing a VAT Inspector on site every eighteen months or so; those visits typically took at least half a day even for the simplest business, and usually involved a quite detailed comparison of the business bank account and sales and purchase records against the quarterly returns submitted since the last inspection. If all were generally ‘OK’ at that level, the visit would conclude with what became almost a ritual dance between The Inspector and The Proprietor revolving around small items of expenditure that may have been wholly for business purposes [-or not]: private phone bills; motor expenses; ‘staff lunches’; food stock written-off and consumed on site, etc. In most cases it was deemed safest to let the Inspector score a minor victory on something pretty small – like disallowing part of the VAT on the operator’s home telephone bills – so that honour could be satisfied, and then take them for a bite to eat at the nearest hostelry before they could stumble on something more interesting. Although few will openly admit it now, many accountants took a similar approach to the annual tax submissions for their clients; provide a lot of detail in those expense categories which were known to particularly interest Tax Inspectors [“Motor Expenses”, “Legal & Professional Fees” and the dreaded “Miscellaneous Expenses”] – agree to some small disallowance demanded by the Inspector in one of those areas, and the rest would probably go through without much more scrutiny. Over time the VAT visits became less frequent, and indeed many forecourts haven’t seen a VAT Inspector in any official capacity for years, unless they’ve been in a situation where the business has just submitted a return that was going to result in a large refund of VAT. In some respects a parallel story developed with annual accounts; generally they seemed to be accepted without requests for further explanation or information – unless the Revenue were already suspicious of the trader’s activities in which case they might just initiate a much deeper inquiry into almost everything. Accountants spent hours preparing detailed analyses of various expenses only to find that in most cases the Revenue didn’t want to discuss them. On both sides the story tended towards ‘all or nothing’ – either the basic information supplied by the taxpayer was accepted without further query, or it went to the other extreme and a costly examination of all the figures ensued. There may well be impeccable logic to having HMRC pay a bit closer scrutiny to the accounts and tax returns of all businesses, with the intention of collecting more tax for the Exchequer. It’s quite possible that some businesses have fallen into sloppy habits as far as their accounting and record-keeping procedures are concerned, since the chances of anyone ‘official’ The reason why the frequency of VAT inspections dwindled almost to insignificance, and the Revenue became increasingly relaxed about the quantity and quality of the information they received from thousands of small businesses over the last ten or fifteen years, was simply COST. Such attention required trained, experienced people at HMRC who were able to spend at least half a day per client out in the real world for a VAT visit, sometimes many miles from their offices; it meant tax inspectors who were given the time to go through each set of accounts with a fine tooth comb and contact the taxpayer and correspond with their accountant. Successive governments have demanded ‘efficiency’ # # # EKW Group is recognised as a leading retail accountancy specialist and has been providing bureau and outsourced accounting and associated services to retail branded networks since 1935. End
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