The Chancellor made much in his Autumn Statement, in December, of the continued drive to reduce tax evasion. The headlines have focused on the evaders using elaborate tax schemes or the avoidance of tax by many multi-national companies. But, it is not all about the headline stories. The small businesses, partnerships and sole traders that are at the centre of our economy are never far from the taxman's gaze and the number of compliance visits made to SME's continues to rise.
In recent years HMRC has been evaluating the way in which it conducts compliance checks. This has resulted in a far more aggressive approach to collecting revenue partly driven by a desire to raise cash for the budget deficit and partly by diverting more staff than ever before to the task. This has resulted in an extra £9 billion being raised over the last three years. In 2012/13 the number of tax compliance checks being carried out increased from 119,000 to over 237,000 – in just one year.
The HMRC computer system – CONNECT – contains literally millions of pieces of information from interest being paid by banks and building societies, to properties being bought and sold, or loans held. HMRC also monitor social media, E-bay trading and newspaper small advertisements.
It is of course, vitally important that clients do ensure they supply us with full details of their income. Even innocent errors and omissions can cause enquiries which may result in additional tax, interest and possibly a penalty on top. It is also important to avoid the necessity of having to amend a return, if possible, or use estimated figures, because risk of an enquiry is very substantially increased. We are therefore proactive and always urge clients to let us have the information to complete their returns/accounts as soon as possible.
Many businesses and individuals feel they have done nothing wrong and therefore will never be investigated, but that is not the case. It is true that the vast majority of targets are selected because HMRC thinks that there are perceived anomalies on their returns or accounts, for instance, figures that vary widely from year to year. There are usually perfectly good reasons for this but it will not stop HMRC from investigating. Nor will it prevent you from being selected completely at random.
It is a sad fact that in the majority of cases, clients pay more in accountancy fees than HMRC collects in extra tax. This is one reason why we offer clients membership of our Tax Investigations Service. In the event of an enquiry our clients should be protected from having to worry about the fees. The premiums start from only £125 net for businesses up to £6Million turnover and only £55 net for personal tax cases.
Details of our Tax Investigations Service are being offered to our business clients early in the New Year, with our 2015/16 cover commencing from 1 April 2015.
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| GRAHAM FRANCIS |