Q. I believe that H M Revenue and Customs (HMRC) have recently launched the trial of a new process of enquires called the Single Compliance Process (SCP). When did the trials start, what is the aim and how will they be implemented?

A. One of HMRC’s top priorities as part of the Spending Review is to relieve the compliance burden on businesses and their agents and increase the efficiency of their activities. HMRC say they want to bring together what they know and believe works well from Self Assessment Enquiries (‘Full’ and ‘Aspect’), Employer Compliance and Assurance work.

HMRC are currently looking at these components to devise improvements in their approach to the enquiry process, which they have called the SCP and will be on trial between June and December 2011 when HMRC aim to review 1100 to 1200 businesses in the following 12 pre selected areas including Belfast, Cardiff, Edinburgh, Exeter, Newcastle, York and Warrington.

An information sheet will be sent to both the business and their authorised agent of any selected business with the opening documentation, to explain that the enquiry is part of the HMRC trial of the SCP.

In the trials HMRC will use the new process for formal Full and Aspect enquiries into SME’s. The trials will also include assurance work carried out typically for VAT and Employer Compliance. It will exclude pre return compliance checks. The new process seeks to align their approach and to minimise the impact on the business by earlier contact and resolution and working multiple tax risks where necessary. It should not, for example, slow down the current process of conducting VAT visits nor add steps to that process.

The SCP will cater for both single tax and cross-tax enquiries. HMRC envisage the SCP as a single framework within which the majority of future SME business enquiry work will be undertaken. Their approach will use the five process stages which are common to most enquiries. Using this design framework they have proposed four different approaches, with varying amounts of time spent on each case, which they call intensity.

The SCP allows for the enquiry to be driven by the risks or behaviours identified and includes building on the principles of Openness and Early Dialogue (OED) by informing the taxpayer and the agent at the first opportunity of the particular risks to be addressed to give time savings and clarity for both parties about the risks being addressed. HMRC hope to develop a relationship with the business and adviser for mutual understanding of the benefits of particular approaches and how these maintain the pace or speed up the process.

In addition HMRC hope to achieve collaboration between HMRC businesses and agents at every stage in the enquiry and communicating any findings directly so that there should be “no surprises”.  Swifter record reviews carried out ‘on site’ and sample record reviews as opposed to a full review when appropriate and only seeking the facts and evidence to address the particular risks identified and not using the enquiry to undertake a general “fishing expedition”, meaning that discussions are more focussed.

By focussing on the risks or behaviours identified and streamlining the process within a consistent framework, HMRC believe that the SCP will reduce business burden by reducing the time taken to complete enquiries, focus the intensity of the enquiry so that it is proportionate to the risks identified and provide a flexible framework for their staff and business in which joint expectations are clear.

The SCP is designed to concentrate solely on the risks or behaviours identified for the enquiry, using four different levels of intensity proportionate to those risks.

The levels and the projected time required by HMRC to perform its review will include a first level which will be to carry out an enquiry where there is no need for a face to face meeting, for example by correspondence, and with minimum inconvenience. (Maximum time 1.5 days)

A second level will adopt a simplified and faster route for those cases where a lower intensity face to face intervention approach is required (maximum time 2 days), whilst the third level will address cases requiring a greater amount of time because the depth and breadth of the enquiry is more involved (maximum time 4 days).  Finally the fourth level will tackle the most demanding cases such as those indicating tax evasion characteristics or those highly complex in nature (maximum time 8 days)

At present we have little feed back from any business who has been involved in this trial so
we will have to wait and see how the trial proceeds and what real effects it has to the long term development of tax enquiries and compliance.

If you are identified for one of these “SCP Trials” and need any further assistance then our Tax Consultants are available to deal with your queries on 01455 852555.