The Income Tax (Pay As You Earn) Regulations 2003, reg. 97(1) require every employer to produce for inspection to an authorised officer of the Board, at such time as the officer may reasonably require at the prescribed place, the following:-
97(2) The records specified in this paragraph are:-
97(3) “The prescribed place” mentioned in paragraph (1) means:-
97(4) The authorised officer may:–
97(5) Where any document is removed in accordance with paragraph (4)(b), the authorised officer shall provide:–
97(7) where records are maintained by computer, the person required to make them available for inspection shall provide the authorised officer with all facilities necessary for obtaining information from them.’
Failure to produce any document or record, or to furnish any information required under reg. 97 lays the employer open to a penalty under TMA 1970, s. 98, which provides for an initial penalty of up to £300 followed by a further penalty of £60 per day for each day the failure continues after the initial penalty has been awarded.
In addition to their existing powers to inspect PAYE records, Finance Act 2008 gives HMRC the power to inspect business premises. They have said that they will use this power when they carry out an employer compliance review to check the financial records against the reality of the business, particularly to see if the records reflect the true number of employees.