Power to Inspect Documents
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:-
- all wages sheets, deductions working sheets, certificates given in accordance with regulations 46(1) and (2) (other than those which the employer has sent to the inspector) and other documents and records whatsoever relating to the calculation or payment of the earnings of his employees in respect of the years or income tax periods specified by such officer or to the deduction of tax from such earnings; or
- such of those wages sheets, deductions working sheets, certificates or other documents and records as may be specified by the authorised officer.
97(3) “The prescribed place” mentioned in paragraph (1) means:-
- such place in the United Kingdom as the employer and the authorised officer may agree upon; or
- in default of such agreement, the place in the United Kingdom at which the documents and records referred to in paragraph (2)(a) are normally kept; or
- in default of such agreement and if there is no such place as is referred to in sub-paragraph (b) above, the employer’s principal place of business in the United Kingdom.
97(4) The authorised officer may:–
- take copies of, or make extracts from, any document produced to him for inspection in accordance with paragraphs (1) and (2);
- remove any document so produced if it appears to him to be necessary to do so, at a reasonable time and for a reasonable period …
97(5) Where any document is removed in accordance with paragraph (4)(b), the authorised officer shall provide:–
- a receipt for the documents so removed; and
- a copy of the document, free of charge, within seven days, to the person by whom it was produced or caused to be produced where the document is reasonably required for the proper conduct of a business.
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.