The Finance Act 2008 has introduced a number of changes to compliance which will take effect from 1 April 2009.

The main changes are:

• HMRC will have one set of powers covering PAYE, VAT, Income Tax, Corporation Tax, Capital Gains Tax and Construction Industry Scheme to visit and inspect businesses and records and to request information and documents
• Greater flexibility in setting record keeping requirements
• New time limits
• Safeguards for taxpayers

For VAT, the time limits for assessments and claims will be increased from three to four years. The legislation ensures that claims that are already out of time are not brought back into time.

HMRC has published an e-learning package on its website. This sets out the new framework in more detail.
 

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HM Revenue & Customs’ campaign of compliance checks into property income, announced last month, appears to have begun in earnest. We have been told of a number of people who have received letters from the Revenue.

At first glance the letters look innocuous; a straight forward enquiry, asking whether tax returns might have omitted rental income in error.

It would be wrong to underestimate the gravity of these letters on a number of grounds, including:

• in our experience, the Revenue will have done their homework. Though they may have made mistakes in compiling their lists, shaking them from their belief that their information is perfect will not be easy; and 
• though their letter may not look threatening, they will undoubtedly be treating this as a serious issue. In addition to collecting the tax due (and interest where it has been paid late), the Revenue will look to apply penalties, which could theoretically double the tax payable.
  

Finding information relating to rental income, interest payments and other expenditure from a number of years ago will be a difficult task; without it – and the goodwill of the Revenue – the amounts payable could escalate.

If this is an issue potentially of concern to you, please contact Cathy Corns or me. We have helped a large number of clients in dealing with Revenue enquiries and might be able to provide practical and timely advice and assistance.

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HMRC has recently published three further consultations on its Powers, Deterrents and the accompanying Safeguards.

• Penalties Reform – proposals to extend the new framework for penalties on incorrect returns and the introduction of a new penalty for failure to notify HMRC of taxable activities.
• A New Approach to Compliance Checks – proposals on a framework for HMRC to check that taxpayers are paying the correct amount of tax.
• Payments, Repayments and Debt – changes in the way that HMRC collects tax debt.
  

These documents herald some potentially significant changes. If you would like further information all the documents are available on the HMRC website at www.hmrc.gov.uk/consultations/index.htm.

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