A welcome hotel guest? An Interesting Experience

Ralph Godley

When my hotelier client rang to say he had a letter from HMRC asking if he would like to take part in their new pilot risk based inspection regime, we were not immediately convinced it was a good idea.

The letter stressed that this was voluntary and that if he chose not to take part, it would not increase the likelihood of the business being chosen for a formal enquiry. At that point we decided we had no choice.

At the client briefing, prior to the meeting, I explained that HMRC are piloting a range of new compliance interventions targeting risks in specific trades or industry groups. By better targeting, their aim is to reduce the tax enquiry burden on businesses with a good track record.

From the meeting, the following were some of the interesting points and observations:

• Both inspectors fired questions
• Throughout we were referred to as ‘customers’
• The questions covered tax, National Insurance and VAT
• Most of the record checks carried out were on sales, they were particularly interested to examine the audit trail from customer to bank
• They did a ‘walk through’ test on two day’s activity at the hotel looking at guests staying, functions held and bar/restaurant takings
• They spent more time looking at petty cash expenditure rather than cheaper payments and checked very few payment invoices
• They accepted our word on things like mileage logs for director’s cars, PAYE procedures on Eastern block employees, tips for staff and entertainment costs

After 2 hours they had finished. They thanked us for taking part and confirmed that the business would be classified as low risk, thereby reducing the likelihood of a full HMRC enquiry in the future.

Did we do right in allowing them to come? I think so. From discussions with the Inspectors, they indicated that those who declined the invitation would be considered high risk, thereby increasing the likelihood of a full formal enquiry.