Tax investigations set to increase - ensure you're protected
Posted on in Business News
HMRC has seen "tremendous value" from tax investigations and will invest more over the coming year.
HM Revenue and Customs (HMRC) looks set to increase spend on tax investigations after the department secured an additional £5.9 billion from businesses last year.
"The kind of returns that HMRC is getting on its increased investments into tax investigations would be seen as mouth-watering by the average private sector business," said James Bullock, a tax expert at Pinsent Masons.
"Securing £5.9bn in extra tax from investigations into large businesses for expenditure on compliance staff of just £61 million means that chancellor is getting tremendous value from these teams." he said.
Figures obtained by Pinsent Masons law firm showed that HMRC recovered an additional £97 for every £1 spent on new staff for its large business compliance service last year. Individual high taxpayers and small businesses also led to significant increases in tax take, according to the figures.
The extra VAT take from small firms in the last year hit record numbers, rising 10% to an unprecedented £3.6bn.
Accountants at UHY Hacker Young, who obtained the figures from HM Revenue & Customs, said each tax was being pursued more aggressively, as were enquiries and SMEs.
"Investigations into SMEs and individuals are now a focus of the organisation in a way that that was not the case in previous incarnations," said Mark Giddens, a tax partner at UHY.
"We are seeing a more hard-nosed attitude in HMRC's approach to investigations [and] with this sharper focus... enforcement cases are bringing in rising amounts of extra tax."
UHY said: "More and more small businesses in particular are finding themselves facing investigation over VAT arrangements that have long been accepted by the tax authority."
According to the firm, HMRC boosted the amount of extra VAT taken from SME investigations in 2010-11 (£2.2bn) by pursuing a range of different firms and sectors.
"Organisations as diverse as financial advisers, property development companies and sports clubs have all been targeted by HMRC," said UHY's Simon Newark.
Get protected
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.
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