Taxman could soon be knocking at your door

Leading Welsh accountancy firm ktsowensthomas is today (Wednesday 1st April) warning anyone running a business from home that they could have an unexpected visit from the taxman.

HM Revenue & Customs now have the power to enter your home without warning and inspect your business records if you are claiming expenses for ‘use of home as an office’.

The changes – the most significant since the 1970 Taxes Management Act – give income and corporation tax inspectors the same powers of entry as those enjoyed by Customs officials investigating unpaid VAT.

Says tax expert at Cardiff and Aberdare-based ktsowensthomas, Kate Moore: “There are thousands of business people and sole traders claiming expenses for use of a home office but not many people are aware of these new changes which come into effect today.

“The HMRC now has the right to enter these people’s homes and inspect business records without prior warning. Homeowners could even have an inspection sprung on them where no tax return has been made or in a tax return period that has not yet finished. It is therefore vital that all records are complete and up-to-date so that if the HMRC were to come knocking on their door next week all affairs would be in order.”

Other changes included in the overhaul of powers means that HMRC have greater penalty powers. For ‘careless, but non-deliberate’ errors, penalties of up to 30 per cent of an unpaid tax bill can be levied. While if officials believe that the taxpayer deliberately ignored the need to make a payment, fines worth 70 per cent of the final tax bill could be imposed.

Continues Alistair: “While it is very unlikely that a taxman will dawn raid your home, taxpayers need to understand how HMRC’s powers will affect them. While the new rules only apply to ‘business premises’, inspectors will be able to raid a private home if it is used for ‘business purposes’.”

ktsowensthomas is a firm of three-dimensional accountants and tax advisors. With a head office in Cardiff and a regional office in Aberdare, we are well placed to cover the accountancy needs for business and private clients in south and mid Wales. We provide financial and commercial services to owner managed businesses, small businesses, mid to large corporates, public sector, charity, not-for-profit organisations and private clients across south Wales. Our expert Cardiff accountants or regionally based expert advisors would be pleased to review your audit, tax return, business accounts and annual reporting needs.

If you are a small business in Cardiff, Swansea or Newport looking for advice on audit, business consultancy, corporate finance, tax or wealth planning, please get in touch.

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