4th November 2020
Most companies can expect to fall under the HMRC spotlight from time to time and, should the tax inspector come knocking on your door, you’re in for a stressful, intrusive and expensive experience.
There’s no getting away from that. Tax investigations can be a nightmare process for any business.
The cost of an enquiry can seriously impact your financial security. Even if HMRC agree that your records are 100% accurate and there is no additional tax to pay, you will still need to pay the professional fees associated with a robust defence – potentially up to £10,000.
So you will want to make a rough ride as smooth as possible and do everything you can to protect your company, to insure yourself against those costly fees and to survive an investigation.
The simple answer is: If HMRC has reason to believe you are either making errors or deliberately concealing income. The likelihood of an in-depth tax investigation increases if HMRC suspects that tax is being underpaid.
Tax investigations are more likely if:
The first you will know about it is when HMRC contacts you. You will likely get a letter telling you whether HMRC is investigating a particular aspect of your tax return or carrying out a full tax investigation.
HMRC will not divulge what triggers a tax investigation, although the likely scenarios are:
Seek professional advice as soon as a tax investigation starts and get contact an experienced adviser as soon as possible.
Dealing with tax is complicated. You’d be much better off having someone on your side who knows how the taxman operates and is experienced with investigations. Nine times out of ten it will turn out to be cheaper for you in the long run too.
Take specialist advice on how you should respond to requests for information and documentation. Rather than telephone conversations or unaccompanied meetings with the tax inspector, you may be better off dealing with it in writing, ideally through your accountant.
Do not destroy evidence or lie about anything, as that could only incur more severe penalties. It’s also worth considering making payments on account towards any likely tax bill to reduce the amount of interest payable. You want to negotiate an agreement at as low a cost as possible.
Once a tax investigation has started, it can last several months – or even more. A VAT investigation may also lead into a corporation tax investigation, which could then prompt enquiries into the directors’ personal tax affairs.
Your accountant can advise you what to do if HMRC is asking for too much information, taking too long or if you deem their actions to be unreasonable.
The bad news is that you cannot totally eradicate the threat of a tax investigation.
The good news is that you can consider taking out insurance to help cover you against the costs of a tax investigation.
If you run a large and highly-profitable business, you really should have an accountant to manage your finances.
Business owners have the choice to take out insurance to cover themselves against some of the costs associated with a tax investigation (which we already know isn’t cheap).
The insurance covers costs involved with PAYE, VAT, and Self-Assessment investigations and if you decide that you want to appeal against what the HMRC decides.
However, this type of insurance relies on you being a conscientious taxpayer. In order for your cover to be valid, you must complete and submit the relevant returns properly, and on time.
Tax protection helps with the cost of an investigation, therefore it will not cover:
RDG Accounting offer a Tax Investigations Service which includes additional benefits to best meet your needs.
This year, we have reviewed the fee protection market and, to enable us to offer the best available service, we have partnered with the market leading provider who has an excellent reputation within the accountancy profession.
You may already have cover through membership of a trade body but if not give us a call?
We are confident that our service delivers the most comprehensive protection against the fees arising from professional representation in the event that HMRC opens an enquiry into your tax affairs. We will support you in your defence against HMRC, and our expert representation will ensure your tax arrangements are treated correctly and fairly.
As your adviser, we are confident that the service delivers the most comprehensive protection against the fees arising from professional representation in the event of an HMRC enquiry.
If you subscribe to our Tax Investigations Service, we will:
If you would like to discuss our Tax Investigations Service with us further, please fill in your details below and one of the team will be in touch. Alternatively give us a call on 0333 200 0714.
have you read our previous post?