Examine audit exemptions for SMEs
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HM Revenue & Customs carry out various tax audits and investigations
into all businesses operating in the UK at some time or another. In terms of
SMEs, such audits will focus on your compliance with Pay As You Earn (PAYE) and
other employee regulations. Responsibility for employer compliance (i.e.PAYE and benefits
reporting) is now dealt with by the Inland Revenue's New Office Structures (the
Taxpayer Service Offices and Taxpayer District Offices). Many SMEs should now only get one employer compliance visit from the
Revenue. For major groups of companies, the position is currently
unchanged: they will continue to be visited by Group PAYE Audit and each of
their sites may also receive a visit from the local inspector. Group PAYE Audit has now become part of the Inland Revenue's Large
Groups Office (LGO), and as a result is beginning to look at companies whose
corporation tax affairs are dealt with by LGO, even though the companies may
not be part of a group of companies. Within the Inland Revenue there is a drive towards 'co-ordinated case
working', with all aspects of compliance being considered at the same time. The
intention is that this will benefit companies because their affairs will not be
constantly under review by different offices. Naturally the Inland Revenue also expects that it will make audits
more effective. The company's corporation tax inspector will become more
involved and can prime the PAYE auditor to look at certain issues. Group Audit is also developing specialist expertise. For example,
particular issues which affect financial companies will be dealt with by two
designated offices. The Special Compliance Office (SCO), the premier investigative arm of
the Inland Revenue, is also involved in the co-ordinated case working
initiative. This can mean that a routine PAYE inspection can develop into
something very different! What an audit involves:- The auditors or inspector will review all of the company's
records, on a sample basis, which impact on employee remuneration
- There will usually be a briefing session prior to the audit
when the company has the opportunity to disclose known failures and mitigate
potential penalties
- A post inspect report (PIR) will be issued by the auditor
within 28 days of the visit which will set out the objectives, tests, results
and recommendations. This will form the basis for a negotiated
settlement.
You should note that if there is any delay in the PIR being sent out,
it may well signal that the District Inspector or SCO is taking an interest in
the case.
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