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HMRC have launched an e-learning module covering the new framework for compliance checks which come into force from 1 April 2009.

The module, originally used by HMRC staff, demonstrates how HMRC officers will check the tax position of individuals, companies and VAT-registered bodies.

The changes will affect how HMRC manage compliance checks for:

• Income Tax;
• Capital Gains Tax;
• VAT;
• PAYE;
• The Construction Industry Scheme; and
• Corporation Tax.

The new compliance checks legislation is designed to make the tax system simpler and more consistent. From 1 April 2009, HMRC will have one set of powers covering PAYE, VAT, Income Tax, Capital Gains Tax, Corporation Tax and Construction Industry Scheme to:

• visit businesses to inspect premises, assets and records; and
• ask taxpayers and third parties for more Information and documents.

These powers are provided by Schedule 36 of the Finance Act 2008.

The new legislation will also provide:

• greater flexibility in setting record-keeping requirements after 1 April 2009;
• new time limits for assessment and claims which will not be fully in force until April 2010 - but there will be some transitional arrangements from 1 April 2009;
• important safeguards for customers.

These measures are provided by Schedule 37 and Schedule 39 of the Finance Act 2008.

The new legislation provides HMRC with:

• one set of powers to inspect business records, assets and premises;
• the ability to see statutory business records without a right of appeal;
• the ability to look at records for PAYE, Income Tax, the Construction Industry Scheme, Capital Gains Tax and Corporation Tax during the tax year before a return has been submitted;
• a new power to correct obvious errors in a tax return based on information held by HMRC; and
• a single approach across all taxes to asking taxpayers and third parties for supplementary information, based on formal information notices with a right of appeal.

The legislation also makes some changes to the way HMRC must carry out compliance checks, including:

• a new four-year time limit for assessments and claims - a reduction from six years for Income Tax, Capital Gains Tax and Corporation Tax and an increase from three years for VAT;
• reductions in extended assessment time limits;
• a streamlined process for closing Corporation Tax assessments;
• a new statutory ban on inspecting purely private dwellings without consent;
• a statutory requirement for HMRC to give at least seven days prior notice of a visit, unless either an unannounced visit is necessary, or a shorter period is agreed;
• a new requirement that unannounced visits must be approved beforehand by a specially trained HMRC officer; and
• a statutory requirement on HMRC to act reasonably.

The new e-learning module, which has been rolled out to HMRC staff, takes less than half an hour to complete and provides an overview of the new framework. It will help businesses understand the measures brought in by the Finance Act 2008 and how these will change the way HMRC officers check the tax position of individuals, companies and VAT-registered bodies.