HM Revenue and Customs (HMRC) is increasing the number and scope of tax investigations into both individuals and businesses, covering all aspects of potential underpayments of tax, including offshore investments, personal and corporate Self-Assessment Tax Returns, PAYE and NIC compliance and VAT.
This increased enquiry focus was already evident prior to the COVID-19 pandemic. The pressure on government to raise funds to recover the significant sums deployed will only increase this.
In the past, an individual inspector reviewing tax returns – or through random selection – would trigger most enquiries. However, HMRC now has many tools to risk assess taxpayers, and random selections are rare. Data analytics processes, information provided by financial institutions and tip offs from third parties are increasingly used to flag returns that merit a second look. It is quite likely that if HMRC opens an enquiry, they believe an error may have been made.
Routine enquiries
Complex investigations
Unblocking problems
Protecting your costs
Routine enquiries
Routine HMRC enquiries can be complex and lengthy, and if HMRC does not understand the response they receive or believe the response has identified further risks, the process can be further delayed. For individuals and businesses, an enquiry can be a major distraction from your normal activities, and a massive concern. Our trusted advisors will match the right specialists with your needs to provide you the necessary support to give HMRC clear and correct responses, and hopefully bring the enquiry to a swift close.
Complex investigations
Our specialist Tax Investigations team will help you with the more detailed investigations, such as those conducted under Code of Practice 9 and other suspected fraud investigations. We will provide full support during the enquiry and will deal directly with HMRC, securing the correct tax treatment of any disputed matters and negotiating the best settlement for you. Where relevant, we bring in other specialists from our team, such as accountants, valuation experts or those specialising in fraud and forensic accounting to provide expert added support.
Unblocking problems
Sometimes enquiries can be lengthy. HMRC can appear intransigent, but equally HMRC itself can find that the responses they receive only raise further questions. In many cases, a fresh perspective by different advisors will unblock the process. We have good success rates with taking over enquiries which the taxpayer or their advisors have been unable to conclude. We will work with you to bring the matter to a positive closure.
Protecting your costs
Enquiries and investigations can be expensive, particularly when they are protracted. Fee protection insurance covers the professional fees for dealing with enquiries so that if your case is put forward to HMRC you won’t need to worry about the cost.
Case study
Our insurance broker engaged a local firm of advisors for their routine accounting and tax compliance needs. After restructuring the business, HMRC raised an enquiry into the process and challenged the value of capital gains that had been calculated by the directors. If HMRC were successful in their challenge, the directors would face a £1m tax bill. After 18 months of enquiry, the advisors had not been able to move the case forward.
An insurance specialist in our Tax Investigations team picked up the case and re-presented the arguments to HMRC to support both the commercial aspects of the transaction and the basis of valuing the business. After two letters to the inspector and a conference call, HMRC accepted that the returns were correct, and the £1m potential tax liability was dismissed.
