HMRC have the power to investigate whoever and whenever they see fit.
Budget 2015 announced further measures to tackle offshore evasion, close down tax avoidance, and toughen sanctions for those who continue to evade tax by closing the existing disclosure facilities for tax evaders early.
Figures obtained by Pinsent Masons, showed that HMRC recovered an additional £97 for every £1 spent on new staff for its large business compliance service in 2013/2014, up from £87 per £1 in 2012/2013. HMRC also announced it collected £18 in additional tax for every £1 spent by local compliance teams investigating individuals and small businesses in 2013/2014, up from £16 per £1 in 2012/2013. Given these returns, it is likely that HMRC will continue to invest in tax investigations undertaken by its local departments.
Budget 2015 says agreement has now been reached by 92 countries to exchange information on bank accounts automatically, every year. Under these agreements HMRC will receive a wide range of information on offshore accounts held by UK tax residents. This represents an unprecedented change in HMRC’s ability to tackle offshore tax evasion. The budget announced that the government will invest £4million in data analytics resource to maximise the yield from the Common Reporting Standard data, and the 2015 Finance Bill will include legislation on enhanced civil penalties for offshore tax evasion.
With a maximum penalty of £3000 for a failure to keep adequate records alone this equates to 50,000 businesses being “caught” with sub-standard records and book-keeping. HMRC have said they wish to inspect 50,000 businesses a year.
The double whammy here for small and medium businesses is that should the inspectors find anything suspicious then they can enforce a penalty for substandard record keeping AND there is the possibility of additional tax and penalties through subsequent IT/CT/PAYE/NIC or VAT checks.
Minimising the risk of an enquiry
Under our fee protection policy, we can reclaim our costs in protecting you during a tax investigation and we will be able to defend you in the event HMRC checks your books and records or requests entry to your business premises. For peace of mind, we believe every client should be protected in the event of a tax investigation and, where stated in your engagement letter, your fee will include a subscription to our tax investigation service as tax investigations can last several months and even years.