Prolonged tax investigations inflicting big burden on businesses
Posted on in Business News
Almost a quarter of HMRC tax investigations last more than a year, resulting in substantial costs and a big impact on day-to-day operations of the business. Make sure you're protected with ActSmart.
According to law firm RPC, 23% of all tax investigations launched by HMRC are still unresolved more than 12 months later.
HMRC currently has over 115,000 tax investigations open against individual taxpayers and businesses and of these, over 3,800 have been open for more then three years.
Prolonged HMRC investigations generate a great deal of uncertainty for taxpayers; it is normally the case that HMRC will give no indication of how long it will take for the enquiry to complete and whether any additional tax will be demanded.
An investigation can also occupy large amounts of time and resource for both individuals and businesses. Adam Craggs, Partner and Head of RPC's Tax Disputes team, explains: "Prolonged enquiries by HMRC impose a substantial burden on individual taxpayers and businesses.
"Regardless of the outcome, those being investigated will have to bear the burden of the costs associated with dealing with HMRC and this can entail substantial professional fees."
For smaller businesses, in particular, these investigations can have a considerable impact on day-to-day operations as a large proportion of senior management time may have to be devoted to dealing with matters raised during the investigation.
RPC adds that this burden on small businesses is unlikely to lessen as HMRC is under continued pressure from the Government and is showing a renewed determination to maximise revenue.
As announced in the Chancellor's Summer Budget, HMRC is also set to receive an additional £750m from the Treasury in order to crank up its tax gathering capacity.
There have been calls for HMRC to introduce a time limit or "cut-off" point, by which time the enquiry must be concluded to help speed up complex investigations.
Get protected
In order to protect yourself from possibly years of disruption and added cost to your business, there are some steps you can take.
In most cases if your business is selected for a compliance visit it
will be because the HMRC suspect you may be doing things incorrectly. If
you file your returns on time, pay your tax on time, and explain any
large variations to current year figures compared to previous year
figures, then you will be sending a strong message that you know what
you are doing, that you understand your responsibilities, and that you
are running your business in a compliant fashion.
However, if you are ever sought out for an investigation, ActSmart's subscription packages come with tax investigation protection as standard, so you can be safe in the knowledge that you'll be covered against any of the costs incurred as a result of having to supply information to HMRC.
If you need any advice on what your business is required to do, ActSmart subscribers have 24/7 access to our business support and legal helplines which can help you to stay up to date with HMRC changes.
To make sure your business is covered, join ActSmart today.
Join ActSmart