This Content Was Last Updated on November 5, 2015 by Jessica Garbett


Interesting new HMRC powers confirmed in the Budget speech. Undoubtedly these are part of the rationalisation following the merger of the old Inland Revenue & HM Customs & Excise, but the scope of them makes you wonder whether, with the Brown administration, Treasury civil servants think they have an opportunity to use a sympathetic ear to go for a land grab.

Some of the new powers:

– significant increase in penalties with the new regime – 30% penalty for failing to take reasonable care, 70% for deliberate understatement, 100% for deliberate understatement with concealment. Even not telling HMRC about an error they’ve made and you’ve spotted could bring you into the 30% zone.

– power to levy a penalty on a third party who has deliberately provided false information to or withheld information from, a taxpayer.

– power to inspect business books and records other than for PAYE / VAT without needing to open a tax enquiry.

– power to compel third parties to provide information about a tax payers affairs (thought they already had that power anyway).

– power to visit and enter business premises unannounced (VAT inspectors had that power already)

Additionally assessment time limits across taxes are being harmonised:

– deliberate understatement / failure to notify – 20 years
– mistake and discovery – 4 years
– failure to take reasonable care – 4 years for vat, 6 years for most other taxes

other than VAT, where the limit is currently 3 years for failure to take reasonable care type assessments (i.e. correction of errors), most of these limits are similar to those on the statute book at present.

Mistake and discovery does not apply to small errors, which would be covered under failure to take reasonable care. Discovery is the process of HMRC raising assessments in light of new information received, information which if they had held it earlier, would have lead the,m to raising an assessment then. Mistake is the taxpayers equal and opposite power to correct a significant previous error in the basis of taxation, eg due to a change in interpretation of law.