The extension of HMRC’s powers could affect thousands of business people and sole traders who claim expenses for “use of home as an office”.
HMRC says its changes from April 1 will be the “most significant changes to HMRC’s powers since the enactment of the Taxes Management Act in 1970”.
Smith & Williamson head of national tax investigations Sue Holmes says: “The many thousands of business people and sole traders who claim expenses for ‘use of home as an office’ should recognise, that from next month, HMRC has the right to enter their home to inspect business records. This power includes visits to any business premises, including any part of a residential home used as an office.”
Moreover, if the inspection is approved by an authorised officer, HMRC is not required to give any advance notice.
Other changes included in its overhaul of powers mean that HMRC will also be able to request information relating to transactions, to assess the likely ‘tax position’ of an individual. This will include past, present or future tax liabilities, whereas in the past only historical transactions were enquired into after the submission of tax returns.