Negotiating the outcome of an employer compliance check

Produced by Tolley in association with Lesley Fidler

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Lesley Fidler provides comprehensive and up to date tax information covering:

  • Negotiating the outcome of an employer compliance check
  • Agreeing the liabilities
  • Grossing up or not? Who pays what?
  • Contract settlement
  • Final steps

Negotiating the outcome of an employer compliance check

Dealing with the irregularities that may arise from an employer compliance check requires a good working knowledge of the applicable legislation and practice. Arguments based solely on concepts such as fairness and reasonableness are unlikely to carry much, if any, weight with HMRC and can unnecessarily prolong the period between the opening of the review and its conclusion. However, it should be borne in mind that although employer compliance officers see a wide range of businesses and are experienced in identifying areas where weaknesses commonly occur, they are not technical experts and can and do sometimes misinterpret legislation or be unaware that rules in earlier periods were different.

In addition, regardless of the contents of guidance notes and other explanatory material produced by HMRC, it is the legislation and supporting regulations that prescribe the law. Whilst guidance may be helpful, the standard statement in HMRC booklets still applies: “This guide sets out HMRC approach in applying legislation…The guide itself has no binding force in law and does not affect any right of appeal by either party.”

Agreeing the liabilities

When compliance officers are certain of their position, they will provide schedules of:

  1. tax and NIC understated

  2. interest from the due date to the actual or estimated payment date with credit for earlier payments on account

In the most straightforward cases, these will be issued under cover of a single letter alongside the notes of the meeting. In other cases, the schedules will only be prepared once further facts have been established. In more complex cases they may form the appendices to a series of letters.

These schedules need to be checked to ensure the computations are sound and based on the principles that have been agreed upon, eg scaling back to produce figures for earlier years, or whether the employer is assuming liability for the employees’ income tax and any other relevant agreements. By the time that computations are under consideration, the

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