Inland Revenue - Powers to Access Premises
| The Inland Revenue have very broad powers to obtain information in order to carry out their duty of collecting the highest possible net revenue for the Government. In more recent times the Inland Revenue have been far more active in using these powers to obtain information which they believe will establish or confirm a person's tax obligations and/or compliance. |
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The Inland Revenue's powers include having the right to enter a business premises without any prior notification to review what they are believe to be relevant business records. You, as a business owner, have no right to prevent them from entering your business premises, or reviewing your records. Furthermore, you must provide Inland Revenue with reasonable access to your business records, whether paper based or electronically. If you are not present at the time, they will require your employees to assist with providing such access. It should be noted that sometimes you may not be the target of Inland Revenue, but instead a source of information relating to a third party.
When I first started as an investigator with Inland Revenue about 15 years ago these "spot checks" were common, but became less frequent during the 11 years I was employed by the Inland Revenue. However, it appears the 'spot checks" are again becoming a regular tactic adopted by Inland Revenue, especially in the industries that involve a high cash turnover, such as bars and cafes.
Before you allow access to your business records, you should be aware of what correspondence could be subject to professional privilege. Certain correspondence between you and your lawyer, or tax advice between you and your accountant or tax advisor may be privileged, and therefore Inland Revenue do not have a right to review, or copy that information. If there is any uncertainty around any correspondence that may potentially be privileged, I suggest that you contact your lawyer or accountant before providing the information to Inland Revenue. Furthermore, it would be prudent to contact your lawyer and accountant immediately if you receive a 'knock on the door' from an Inland Revenue investigator.
If the Inland Revenue wish to enter your private residence to obtain information, they first need to obtain a warrant from a judicial officer. A judicial officer only needs to be satisfied that it is necessary for the Inland Revenue to access your private home to carry out their duties. As it is a common occurrence for small to medium business owners to store their business records, generally electronically on a computer, at a home office, I suggest it is not very difficult to convince a judicial officer that it is necessary to access their home to obtain the business records.
I am not suggesting that the Inland Revenue are going to disregard their standard procedure of providing notification of an investigation, and requesting information in writing. However, if there is any evidence that may provide the Inland Revenue with a reasonable level of suspicion that you may be involved in tax evasion or tax avoidance, you may find that they do not provide prior notification of an investigation. The suspicion could range from the non-declaration of cash sales, to paying employees without deducting and paying PAYE to Inland Revenue.
While Inland Revenue investigators are generally normal people carrying out their duties for their employer, this does not normally reduce any anxiety or stress that a business owner experiences when subjected to an Inland Revenue investigation. This anxiety and stress can be amplified if an Inland Revenue investigator, or normally several investigators, turns up unannounced at your business premises or your doorstep at home, with a warrant requesting information. The key is to keep calm and provide reasonable access to the Inland Revenue investigators, but contact your lawyer or accountant immediately.
Bevan Spalding is a Senior Tax Manager of RHB Chartered Accountants Limited.
This article expresses the views of Bevan Spalding, and do not necessarily represent the views of the employees and directors of RHB Chartered Accountants Ltd.
Disclaimer
It is recommended that you consult your advisor. No liability is assumed by RHB Chartered Accountants Ltd for any losses suffered by any person relying directly or indirectly upon the article above.
Published in the Bay Business Times, December 2011
