Dawn Raid and Critical Incident – what you need to know

 In HMRC Investigation, Power

While HMRC now have significant powers in this area they are often overstated. Here we explore what’s being said, what powers HMRC actually has and finally explain the wild exaggerations.

From April 2009 HMRC increased their powers significantly particularly with regard to turning up on your doorstep unannounced – there was a fish and chip shop ‘raid’ in 2011 that made many tax advisers very interested – details here.

Here is what Pinsent Masons says:

Critical Incidents such as “dawn raids” are now a fact of life for any business… not a month goes by without some form of “dawn raid” activity being reported in the business pages… It is important to remember that premises, not people, are raided. So your business can be subject to a raid even if nobody within it is actually being investigated.

Here’s what Mondaq says:

The number of prosecutions doubled between 2011/12 and 2012/13 alone… The search warrant may allow HMRC to search your staff without arrest. Searches must be carried out by an officer of the same gender… HMRC are entitled to remove or copy documents stored electronically as well as in paper form. They will usually take an image of your server on‐site, but they can take it away instead if they wish. Mobile electronic devices ‐ including personal devices which receive work communications ‐ routinely will be confiscated for imaging later.”

So that all sounds super scary! Now don’t get my wrong, if the government suspects you are smuggling guns, dealing drugs or running a meth lab they can get a warrant to search your premises, BUT if they want to see your business paperwork because they think you may be sticking some cash in your back pocket their powers are much more limited.

Let’s look at the facts:

These are not raids. A raid is when the Sweeney kick your door in and pin you to the floor, in these events you’ll just have HMRC knocking on your door. The whole “dawn” bit is also bogus, yes these events may take place at dawn, but they are equally likely to take place at 3pm in the afternoon – they can happen at any time.

While HMRC have a right to enter your business premises and inspect your business records you should only let them in when you are good and ready. You have a right to refuse them entry and this trumps their rights!

If they come to your business premises and ask to see documents you can simply say no, they are allowed to ask, you are allowed to refuse.

If they come to your business premises armed with written authorisation from the Tax Tribunal you can still refuse entry. The worst they can do is stick you with an initial penalty of £300 and a further £60 per day until you allow the inspection. That may sound like a chunk of cash, but it may be a small price to pay for the chance to get your house in order.

So why all this “dawn raid” scaremongering? It’s partly confusion, partly obfuscation and it’s partly because the training courses being sold on the back of this are over £3,000 a pop.

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If you’ve found this enlightening do check out Everything You Wanted to Know About A Tax Investigation…
Everything

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