For tax advisers and inspectors, these are interesting times. On the one hand, harmonisation of powers across Revenue & Customs is creating heightened anxiety about the ability of individual inspectors to push the boundaries in terms of access to businesses premises, documents and information. On the other, there are clear signals of a willingness from the Revenue's leadership to try to understand the needs of tax practitioners and potentially work in closer harmony with them. The question is, how will these potentially conflicting trends play out? No one challenges the Revenue's move to harmonise its powers across all taxes. This was on the cards from the moment the merger of the old Customs & Excise and the Inland Revenue was mooted. The united Revenue has also taken pains to consult on the matter. However, with the consultation proposals now part of the Finance Bill, there are some concerns about how exactly the new powers will be exercised and the adequacy of safeguards for taxpayers. Paul Aplin, a tax partner at A C Mole & Sons and chairman of the ICAEW's Tax Faculty, says some of the proposed new powers are 'increasingly intrusive'. For example, if the Finance Bill is passed without amendment, there will be new powers of entry to business premises for inspection of records and assets in relation to relatively routine direct tax matters (in addition to VAT and PAYE, as now). Although the power to conduct VAT and PAYE inspections at private homes, without having to go through a legal process, is being given up, Aplin still feels that overall 'for the business community it's a major shift in what the Revenue can do'. One fear is that the Revenue could use its enhanced access powers to conduct 'fishing expeditions', looking for tax-raising opportunities without just cause. Best advice to businesses facing even routine Revenue visits is to involve their tax adviser, with inevitable associated costs. Real-time records
The new right of access in relation to direct taxes is seen as going hand-in-hand with the Revenue's growing interest in real-time inspection. 'The Revenue is wanting to get the ability more and more to audit on a real-time basis, looking at transactions as they happen,' says Chris Oates, head of tax risk management at Ernst & Young. 'For the accountancy profession, that creates an interesting tension.' This is because, however transactions are recorded during the year, when it comes to filing the year-end corporation tax return, adjustments may be made to change the previous interpretation. 'Just because the client writes in a book that expenditure is all tax deductible, that doesn't mean it won't be changed,' Oates says. If the Revenue does get involved in real-time reviews, then tax advisers need to be prepared. 'We need to make sure clients have proper systems in place to capture information correctly,' Oates says. 'We need to make sure we are very close to our clients, so they get the right advice.' Although there could be benefits for companies from real-time Revenue reviews in terms of gaining greater certainty about their tax position more quickly, this remains to be proved. Third party information
One major new power relates to access to information from third parties. This new power is causing some anxiety. 'Seemingly an officer of the Revenue may enter any business premises if reasonably required for checking the tax position of a person,' says John Whiting, chairman of the Chartered Institute of Taxation's Management of Taxes Sub-Committee and PwC partner. 'Does that mean that if I have advised you on your tax, they can kick down the door of PwC? That seems to go a bit further than we thought.' This is an abridged version of the magazine article