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HMRC’s latest employer compliance drive to target Mid-sized Businesses

20 September 16 | By: Jas Jhooty


HMRC are currently recruiting several tax specialist professionals at a senior level to take up posts in their new centralised office locations. This document provides further information on the compliance activities that these tax professionals will be engaged in, and makes for some very interesting reading on what HMRC’s future compliance plans are.

Office restructuring

HMRC has planned to close all of their network of 170 local offices to leave just 13 centralised regional offices in the following locations:

  • Belfast
  • Birmingham
  • Bristol
  • Cardiff
  • Croydon
  • Edinburgh
  • Glasgow
  • Leeds
  • Liverpool
  • Manchester
  • Newcastle
  • Nottingham
  • Stratford

HMRC are preparing to have over 22,000 compliance staff in these centres delving into areas of perceived evasion and fraud; and also to check that tax legislation is being correctly adhered to. Employer compliance is being restructured into the following departments:

Large Business

This department remains largely untouched and will continue to deal with over 2,000 large employers with a turnover of more than £200 million. These companies have to adhere to Senior Accounting Officer legislation and most of them have been subjected to HMRC’s “Know Your Customer” initiative over the last few years.

Individuals and Small Business Compliance

This department deals with HMRC’s largest and most diverse group of taxpayers, nearly 35 million individuals and businesses. It leads work tackling the hidden economy, international trade, and National Minimum Wage enforcement, and it hosts HMRC’s anti money laundering supervision team. Most of HMRC’s fraud and evasion resource will be concentrated into this sector.

Wealthy & Mid-sized Business Compliance

This department delivers HMRC’s compliance effort for wealthy individuals, public bodies and Mid-sized Businesses. It is in this department that HMRC employer compliance scrutiny is going to be concentrated on over the coming years.

In recent years HMRC have been focussing primarily on Large Businesses by conducting “Know your Customer” meetings with them to identify any lax employment tax procedures. As HMRC have nearly exhausted the employer compliance yields from Large Businesses they are now turning their attentions towards Mid-sized Businesses (i.e. those with a turnover of between £10 million and £200 million) and Public Sector bodies. These employers are shortly going to receive HMRC notification of a request for a “Check of Employer Records”.

Check of Employer Records

This is a new initiative by HMRC targeted at Mid-sized Businesses to enable HMRC to quickly assess whether or not they should conduct a full-blown Employer Compliance Review on the employer.

The check firstly consists of a Compliance Check Questionnaire requiring to be completed by a senior financial figure in the business. This is then followed up by a detailed telephone call from a HMRC compliance officer for them to assess if the business has or has not been adhering to their employment tax obligations. Common danger areas include:

If the business cannot answer HMRC’s questions fully; or do not appreciate the significance of some their questions, they will be asked to submit further records for review. If these records are deemed to be inadequate by HMRC, they will have no qualms about commencing an Employer Compliance Review.

Mid-sized businesses have been left alone by HMRC compliance officers for a good number of years while HMRC concentrated their resource on Large Businesses. Therefore, there is a very high chance that unintentional errors may have arisen over time that HMRC will now seek to exploit.

How emTax can help

A number of our clients have already received their “Check of Employer Records” notification. We have assisted these clients by informing them of the significance of the questions contained in HMRC’s Compliance Check Questionnaire and have further advised them on how to answer HMRC’s questions to minimise the likelihood of any further enquiries.

emTax has developed a much more thorough questionnaire (that explores all areas of employment tax risk) than HMRC’s version. If you are a Mid-sized Business or a Public Sector body concerned about how HMRC’s latest compliance initiative will affect you, we can send out one of our ex-HMRC consultants free of charge, for an initial advisory visit. At the visit our consultant will go through our questionnaire to ascertain what your current areas of risk are and help you to put them right.

If you are interested in this or any other employment tax service that we offer, please do not hesitate to contact us.

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