HMRC tax investigations: Are you covered?

There is little doubt that HMRC has been ramping up enquiry activity into potential tax avoidance in recent months and that work is going to intensify.

Figures last September showed the number of professional fee insurance claims had increased by 60 per cent over just one quarter as compliance activity increased.

In December, the Financial Times reported that HMRC was under pressure to urgently recoup tax revenue after parliament’s spending watchdog revealed a sharp fall in investigations over the pandemic had cost the government as much as £9bn.

An investigation into your tax return by HMRC is triggered for several reasons: a tip off, paying the incorrect amount of tax, late returns or simply working within a targeted sector to name a few.

The revenue’s ‘snooper computer’ Connect collates data from banks, Land Registry records, Visa and MasterCard transactions, DVLA, council tax, VAT registration documents, Airbnb, and believe it or not even your social media profiles.

The assumption when you’re selected for a tax investigation is that you have done something wrong. This is rarely the case.

Random enquiries into tax affairs can and do happen. Whether you’re an individual taxpayer or business owner, an investigation is possible, and nobody is exempt.

Any taxpayer can be targeted by HMRC, answering all its questions takes time and the enquiries often drag on for months and sometimes take years to conclude.

It can cost a lot to defend you, whatever the result. That is why it as important as it has ever been for you to protect against these costs.

Once HMRC decide to investigate you must comply with their requests. HMRC will check your accounts, request a plethora of documentation, ask lots of questions and may even want to visit you in person.

No additional tax may be due, but you will still be left with enquiry fees which could cost thousands.

Investigations are costly, stressful, and an unwelcome distraction from day-to-day life; whether HMRC initiate a Full Enquiry of your tax history or an Aspect Enquiry into a specific area of your return, you will be liable for the professional costs to bring about a prompt resolution.

Immediate professional representation from your accountant is essential in successfully and quickly dealing with HMRC enquiries, but that comes at a cost, and will not be in your budget.

The good news is there is help available. Tax Investigation Services, like the one WNJ offers its clients, will protect you from accountancy fees associated with an HMRC enquiry, limiting the stress and uncertainty.

As a member of the service we provide, in partnership with Croner-i, you can be safe in the knowledge that we will represent you in the event of an investigation and deal with HMRC on your behalf.

And the service has been boosted to now include access to ‘My Business Hub’ – a valuable online resource which allows you to tap into a taster of the company’s vast business resources.

The ‘digital toolkit’ has been developed by Croner, which has invested heavily to provide valued solutions to thousands of businesses for decades.

The hub delivers advice on subjects including taking on extra staff, health and safety policies and a range of legal matters, including employment law as well as access to expert thinking.

There’s never been a more critical time to have tax fee protection insurance in place or to review your existing insurance arrangements.

• To discuss any issues raised by this article and the insurance policy options available please contact me on 01772 430000