HMRC compliance checks ― Indirect tax

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • HMRC compliance checks ― Indirect tax
  • Introduction
  • Engaging a professional adviser
  • Cooperating with the investigation
  • Taxpayer rights under the Human Rights Act
  • Calculating the penalty
  • Mitigating a penalty
  • Collecting the penalty and indirect tax arrears
  • Appeals and reconsiderations

This guidance note provides an overview ofwhat happens if HMRC suspects ‘conduct involving dishonesty’ has taken place whilst they are undertaking a indirect tax compliance visit. The following procedure covers all indirect taxes with the exception ofStamp Duties, Customs Duties and import VAT.


This procedure is designed to be used for cases involving a lower value where there is evidence ofdishonest conduct or deliberate behaviour and HMRC do not consider that the COP9 procedure is the most suitable way ofdealing with the matter. Please see the Managing serious defaulters guidance note for more information on the COP9 procedure that applies from 30 June 2014.

If HMRC identifies that the business has not accounted for indirect taxes correctly due to conduct involving dishonesty during a compliance check then they may levy a civil evasion penalty under VATA 1994, s 60 on the business. If HMRC also establishes that the business has not accounted for indirect taxes correctly due to deliberate behaviour then they can also apply a deliberate or a deliberate and concealed penalty as well.

If HMRC has reason to believe that the taxpayer has behaved in a dishonest manner then they will invite the taxpayer and their professional adviser (if they have one) to attend a meeting to discuss HMRC’s concerns. The taxpayer will be asked to confirm whether they have any special needs or require an interpreter at the meeting so they can ensure that they prepare for the meeting taking all ofthese things into account.

HMRC will advise the taxpayer and their professional adviser:

  1. the compliance check is not being conducted with a view to commencing a criminal prosecution in relation to any matters that are the subject ofthe check

  2. HMRC will be checking the behaviour and the periods that are the subject ofthe check rather than specific information which has caused their concern that the taxpayer is behaving dishonestly

HMRC will encourage the taxpayer to make

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