HMRC Tax Investigations: Your business is not immune

George Hay Chartered Accountants

Since 2010, HM Revenue & Customs’ (HMRC) total revenue from tax has increased year-on-year and in 2016-17 reached £574.9bn.[1]

Of this, £28.9bn worth of tax was generated as a result of its compliance activities in 2016-17, up from £26.6 billion in 2015‑16 and exceeding their goal of £27bn.[2]

In total, the Government has secured around £160bn worth of additional tax revenue as a result of compliance activities since 2010.[3]

By comparison, Inheritance Tax (IHT) receipts have increased since 2009-10, on average by 11% each year[4], Capital Gains Tax (CGT) receipts in 2016-17 reached £5.2bn, compared to £4.1bn in the previous year[5] and in 2016-17 £124.4bn of VAT was generated compared to £116bn in the previous year.[6]

The UK tax gap is currently the lowest it has been since 2005-06 at 6% which equates to around £34bn[7] and £800m has been dedicated to targeting tax evasion between 2015-20.[8]

These figures demonstrate that HMRC has, in recent years, taken a much more steadfast approach to identifying non-compliance and taking action against those responsible, leaving no stone unturned.

HMRC have been open about their intentions to pursue those who deliberately cheat the system and refuse to pay the sums that they owe, and its latest initiatives and plans to crackdown on tax avoidance and evasion are never far from the headlines.

From landlords and overseas investors, to the gig economy and SME’s and from trusts to online retailers; the truth is, no matter how big your business is, what sector you operate in or how long you’ve been in business, you are not immune from a tax investigation.

In fact, anyone who submits a tax return is at risk of being investigated by HMRC. There doesn’t have to be a specific reason and it can happen at any time.

Most enquiries are generated by computer ‘risk profiling’ and some are selected completely at random, but unusual fluctuations, undisclosed accounts, inconsistent spending and errors on returns can also trigger HMRC’s suspicions. Couple this with powerful software which can identify even the slightest of discrepancies and you could be more at risk than you think.

The tax man can inspect business documents and assets at your premises, request any number of documents from you, make unannounced inspections and go back up to six years in order to examine matters.

Full enquiries typically necessitate HMRC undertaking a thorough examination of your business’s records and books and may also dictate an examination of the director’s personal tax affairs.

All-in-all, tax investigations launched by HMRC are typically:

  • Disruptive: there is rarely a ‘convenient’ time to be investigated by HMRC and should you find yourself subject to one, you will undoubtedly be concerned about how this will impact upon your day-to-day operations, particularly as an investigation can continue for weeks, months or years.
  • Intrusive: as mentioned, HMRC will not take any prisoners when it comes to securing the information they need during the course of an investigation. Compiling this information, submitting it to HMRC, answering any questions that arise as a result and attending any potential meetings can be a significant burden for many businesses and individuals to bear.
  • Expensive: as an investigation goes on, costs will begin to mount. This can have devastating consequences for businesses and individuals at a time when many are already feeling the pinch.

It is imperative to take expert advice and guidance when dealing with HMRC and as your accountant, we are your best defence should you find yourself subject to an investigation. We will do the following:

  • Translate the complexities of the investigation and relay these to you in terms you can better understand
  • Manage any dialogue with the tax man, acting as a barrier between you and HMRC
  • Assist you with the submission of any documentation or information required by HMRC
  • Minimise the impact of the investigation upon your personal and business life
  • Aim to secure an outcome that satisfies both parties

As our fees for supporting you during an investigation are not covered in our usual accountancy fees, we also offer a Tax Investigation Fee Protection Service.

You can find out more about the service and the protection it provides here.

This means that not only can you be safe in the knowledge that a familiar face is handling your affairs, but also that our fees will be covered should HMRC investigate you. As your advisers we believe that we are best placed to be there for you and your business when you need it most.

Here at George Hay we understand the importance of tax when it comes to planning and having financial control of your business, but we also recognise the countless complexities associated with the tax system. We have years of experience when it comes to dealing with both personal and business tax enquiries and investigations, helping our clients to reach a satisfactory conclusion and leaving them with peace of mind when it comes to their tax affairs. To discuss your circumstances in more detail, call us today on 01767 315010.

To find out more about our Tax Enquiries, Investigations & Disputes services, click here.

[1], [2], [5], [6]   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/628377/HMRC_Annual_Report_and_Accounts_2016-17__print_.pdf

[3] https://fullfact.org/economy/government-recouped-tax-evasion-avoidance/

[4] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/632797/IHTNationalStatisticsCommentary.pdf

[7] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/655097/HMRC-measuring-tax-gaps-2017.pdf

[8] https://www.nao.org.uk/wp-content/uploads/2017/12/A-Short-Guide-to-HM-Revenue-Customs-2017.pdf

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