HMRC enquiry activity is more focused and better targeted than ever before. Investigations are intrusive, costly and time consuming. In 2018-19 HMRC collected £34.1 billion through compliance activity.
How can this happen to me you may ask?
Here are a couple of scenarios:
HMRC gets a tip-off
Although HMRC will never admit to this and it will always tread lightly upon getting such information, but it is largely accepted that a tip-off to dodgy tax practices can be the indicator for an investigation.
So why would somebody tip off HMRC for a potential audit?
The most common aggravators are:
- Disgruntled employees or ex-partners who know of tax-dodging activities
- The existence of a cash-only policy at your business
- Living a lifestyle beyond your supposed means
The issue of living beyond your means might be tough to address. It would seem unjust to spend money to fit the idea of your income if you receive money from elsewhere, such as inheritance, investments or trust funds.
The others are fairly easy to address. The first is not to undertake any dodgy schemes. Simply put, anyone given the right motivation could tip off HMRC. It may be a tempting prospect, but the risks are not worth the pay-off.
As for the existence of a cash-only policy, in the modern day, using card transactions is not an expensive practice to introduce. It also removes that concern from suspicious patrons and the watchful eye of HMRC.
Regular mistakes on returns
A one-off mistake with your tax return is little to be concerned about. HMRC understands not everyone is a tax expert and makes certain allowances — depending on your ability to at least demonstrate you weren't fiddling the books.
However, if you regularly make mistakes on your returns, submitting inaccurate figures or information year-on-year, HMRC will quickly grow suspicious.
Routine mistakes will cause investigators to start asking questions about whether these 'mistakes' are really as they appear.
Sometimes, blunders are just blunders, but if you are called up for a mistake on your tax return for more than two years in a row, you need to get in an accountant to help make sure things go smoothly — or fire your old accountant if it's them making the mistakes!
Here at McDade Roberts we provide a valuable tax investigations package to ensure you get the best possible defence without worrying about the cost. See our website Downloads for Markel Tax Protection under Resources on or if you wish to speak to someone, call 01772 717110.