Increased HMRC crackdown on fraud & avoidance
HMRC have been increasing their efforts to reduce aggressive tax avoidance and evasion over recent years. This includes more sophisticated use of data received from banks and other institutions.
The latest data shows that HMRC opened 102,000 compliance investigations into suspected tax evasion and avoidance in the first quarter of 2021. This is a 36% increase from the previous quarter.
Also, in the 2021 Budget, the Chancellor announced that up to 1,000 new HMRC officers will be put in place to target fraud by individuals and businesses claiming under various COVID support measures.
The country needs to repay huge sums arising from lockdowns, so HMRC will be protecting tax revenues accordingly. Businesses should therefore strive to be as compliant as possible to reduce the risks of HMRC investigations leading to tax liabilities, interest and penalties.
Who can be investigated by HMRC?
HMRC may investigate any taxpayer at any time.
HMRC can target anyone who submits a tax return – they do so with highly efficient ‘Connect’ software, which is programmed to trawl through financial information to spot irregularities, errors, or signs of fraudulent activity. 83% of tax investigations are triggered by this ‘Connect’ system.
In 2019, HMRC collected £34.1bn through tax investigations and enquiries – a huge sum of money for the treasury. Through the introduction of 1,000 new HMRC officers, it is clear they are hoping for more of the same this year.
If your business has used a Covid-19 support scheme such as the Coronavirus Job Retention Scheme (furlough) and the Self-Employment Income Support Scheme, it is likely that HMRC will be looking more closely at your tax returns, payroll, payments, and compliance history.
Tax and VAT repayments will also be checked more rigorously alongside the usual full tax investigations.
How to protect yourself and your business
HMRC enquiries are intrusive, disruptive, and expensive. Investigations can take a long time to conclude and resolve, bringing about additional costs and high levels of stress. Dealing with a tax investigation is generally not covered by standard accountancy packages, and it is not included in our normal costs.
For a small fee, however, our team of experts can:
- Defend you if you are selected for an HMRC enquiry.
- Cover all costs included in the service so that you know where you stand.
- Support you through the process and minimise any hassle and stress.
Subscribe to our Tax Investigation Service
Shorts strongly recommends that you take advantage of our Tax Investigation Service. This should give you peace of mind, knowing that you and your business will be taken care of in the event of an HMRC investigation.
If you are not already covered and would like more information regarding this service, please contact us today.