Data released by HM Revenue & Customs (HMRC) has revealed that the yield from tax investigations has gone up year on year, making it likely that the number of investigations carried out will rise.
During the tax year 2013-14, compliance teams collected £18 as a result of investigations for each £1 invested. The amount has increased from the previous year, when £16 was gained for every £1 invested into compliance. In 2012-13, additional tax of £7.8 billion was collected from tax investigations, while the figure for 2013-14 has increased to £8.9 billion. As a result, tax experts believe that HMRC will continue to invest in compliance and investigations.
Experts have warned that more small and medium-sized enterprises are likely to find themselves becoming the subject of an investigation, along with entrepreneurs. Although the focus has previously been on those individuals who have a high net worth, offshore investors and businesses which deal in cash, HMRC is more likely to focus on other areas. One example is the ‘Second Incomes Campaign’, which concentrates on those who have a second job or several sources of income, like private tutors and online traders. Campaigns have also been launched in specific sectors, where individuals have been encouraged to come forward and sign up to a voluntary disclosure scheme.
How to survive a tax investigation
Stay calm and seek professional advice before communicating with HMRC. Outsourcing to an accountant will reduce the level of stress and possibly speed up the investigation, as a professional is used to dealing with HMRC and has an understanding of various types of tax.
Collect as many documents as possible to present to HMRC. The organisation is likely to request documentation and if you comply with their requests, you are likely to be charged lower penalties as a result.
Be honest and upfront with the tax officials. If you don’t understand a particular aspect of the investigation or a request, say so. If you are unlikely to meet a particular deadline, admit it to the officers.
Prepare for meetings with HMRC officers carefully, requesting an agenda prior to the meeting and a copy of the meeting notes to check afterwards. If there is anything in the notes you don’t agree with, raise this with the officer concerned.
If you are facing an investigation by HMRC, contact us at The Accountancy Partnership as soon as possible.
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