With deficit reduction at the top of the Government’s list of priorities, it would surprise no one to see an increase HMRC investigations in the coming months.
This is potentially bad news for smaller businesses that are unlikely to have finance departments that can deal with a full-scale investigation. When the taxman visits a smaller business it can tie up a lot of senior managers’ time and divert precious resources away from the important task of growing the business. It can also be very costly.
In truth, the yield from investigations into smaller businesses is proportionately much smaller than that gained from investigations into multinationals. For example, in the last twelve months, HMRC has yielded a staggering £4.9 billion from investigations into multinationals but a relatively paltry £359 million from Self Assessment business and personal tax enquiries. In fact, for every £1 HMRC spends on investigating multinationals it manages to claw back over £180, compared to just £10 from SMEs and private individuals.
One suggestion to HMRC is – at a time when every business needs to concentrate on getting the economy back up to strength, give smaller businesses a break!
And our advice to business owners is to make sure you are prepared for the possibility of an investigation.
The most important step you can take is to ensure you are in a low risk category. Ever mindful of their scarce resources, HMRC conducts risk assessments to determine which businesses to investigate. If you are considered low risk, your chances of investigation are considerably lower for up to three years after the assessment is made.
If you have not already done so, we advise you to arrange a review with us so we can assess how your tax planning is likely to be viewed by HMRC and advise you on steps you can take to move to and remain in a low risk category.
And, don’t forget, if you are targeted for an investigation we can provide full support throughout the process, including fully representing you to HMRC.
Tags: Personal tax returns, tax planning, UK Corporation Tax
