Concerns raised over HMRC’s ‘tax audit’ plan

Concerns raised over HMRC's 'tax audit' plan

HMRC considers a tax audit of composite companies - but profession warns the plan faces several hurdles

Concerns have been raised over the possibility of the taxman allowing firms
to audit composite companies to check that they are paying the right tax.

HM Revenue & Customs is considering setting an audit standard that will
allow auditors to check that composite companies and individuals operating
within them are paying the appropriate tax.

However, the Association of Technology Staffing Companies has warned that the
standard would not hold any legal guarantee. From January 2008 recruiters face
the risk that they could face a tax bill for the staff they employ.

‘We are pleased HMRC is seriously considering our proposal for an audit
standard, but without a legal guarantee recruiters will still have to factor in
some risk when drawing up preferred supplier lists,’ said Ann Swain, chief
executive of ATSCo.

Anne Redston, visiting professor at Kings College London, warned that
auditors would face risk if they misjudged the service company providers’ tax
strategy.

‘HMRC will not be resourced to do it themselves, so they are delegating it to
accountancy firms – will [HMRC] go to the [auditors] and say “you got it wrong”
?’ she said. ‘I can’t see the Big Four wanting to take the risk.’

Further reading:

HMRC unimpressed with composite
providers’ advertising

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