Tax investigations

Think you’re safe from an HMRC enquiry?

Think again!

HMRC activity

Connect

6 out of 10 enquiries are now selected by Connect, HMRC’s data matching and analytical computer system which holds over a billion pieces of data, collected from banks, building societies, the Land Registry office and the Tax Evasion Hotline, to name but a few. Connect identifies risk and points HMRC in the direction of potential targets.

Campaigns

HMRC launches campaigns to encourage individuals and businesses to voluntarily disclose any under declarations of income in those trades or sectors that they perceive as being high risk. More than £1bn has been delivered from campaign activity. Current campaigns focus on solicitors, credit card sales, second incomes and let properties.

Task forces

HMRC initiates task force activity where a risk is identified affecting a specific geographical area. A typical task force will involve a multi-disciplined team, drawn from various agencies, who work together for mutual benefit. HMRC has started 70 task forces since 2011, which have generated around £200m to date.

Small business case studies

Spanner in the works

An engineering company was selected for a full scale investigation of its Corporate Tax matters that lasted over a year. The inspector suspected understated sales and reviewed the PAYE procedures. Professional defence costs of over £2,500 were incurred to handle the various meetings and correspondence.

Time is money

A small security company was subject to a full enquiry which looked at the tax, PAYE & VAT records. Although some small discrepancies were found in the accounts, matters only really escalated when the director’s personal affairs were considered. Two and a half years later the matter was settled for fees of £4,500. That’s a lot to pay if you don’t have the tax investigations service!

Separating the wheat from the chaff

A farming business has recently been enquired into, HMRC asking for an analysis of the general farming activities, rent and rate expenses; and capital allowances computations for plant and machinery. This is not looking at everything in the accounts, but the initial cost estimate of £1,000 has already been exceeded and subject to HMRC’s approach, could double.

There is nothing particularly unusual about these enquiries and therein lies the problem – even a straightforward enquiry is likely to cost the equivalent of 10 years subscription to our tax investigations service!

If you’re looking for tax advisors Berkshire, please feel free to contact PKB Accountants and we will be more than happy to help.