Mitchell Charlesworth partner Mike Buxton advises businesses and individuals on how to guard against the spiralling costs of a HMRC tax investigation or enquiry.
A tax investigation can be a stressful, time-consuming and expensive experience.
Thousands of businesses and individuals are investigated by HMRC every year and many are selected at random.
HMRC made more than £13bn worth of actual tax collections from tax investigations alone in 2018/19, a 27% increase on the previous period.
The prospect of a tax investigation or enquiry can be daunting. They are time-consuming and there is the possibility of an additional tax liability and penalties. Without professional representation, you could easily end up paying more tax than necessary, so it is vital to involve your accountant from the outset.
To cover the cost of professional fees that result from an unexpected investigation or enquiry we offer clients a fee protection scheme.
The recent tax investigation experiences of two very different clients are featured in the following examples and show how important it is to be prepared just in case. They also show that individuals, as well as companies, can be subject to investigation.
Our client (a company) was selected randomly for a tax investigation by HMRC. They were given 30 days to respond to HMRC’s initial letter with the appropriate information.
They enlisted our help with responding to HMRC as this type of work can be extremely technical and can require significant time and resources in order to handle the investigation correctly.
Unfortunately for the client the lengthy investigation led to £2,000 of additional fees as they did not have fee protection which would have covered these costs.
Our client (an individual) was selected randomly for a personal tax investigation relating to tax due on compensation received from a bank with regards to the mis-selling of a loan product to an individual.
All the costs are personal costs; therefore, the individual has our fees including VAT to pay, which would have been covered if fee protection was in place.
The costs have already reached in excess of £1,500 plus VAT without conclusion.
Whilst a fee protection scheme will not prevent a tax investigation, it will provide reassurance to businesses and individuals that if they are contacted by HMRC, they don’t have to shoulder the burden themselves; instead their suitably experienced accountant who they know and trust, can take control of the investigation proceedings, and the client does not have the additional worry of paying the ensuing costs.
The current Covid-19 pandemic has put a sizeable strain on the public purse and tax increases are inevitable, in order to repay the monies contributed by the Government during this time. HMRC could also look to gain more tax receipts by increasing the number of tax investigations they conduct, therefore increasing the likelihood of more random and targeted investigations over the next few years.
How to sign up for our tax investigation fee protection scheme
For more information on our tax investigation fee protection scheme, please click here.
If HMRC states its intention to investigate your tax payments, don’t panic, please get in touch with us. We can translate the many complicated questions HMRC may pose, manage the entire conversation with HMRC, help you submit any required information and minimise the impact on your business or personal accounts.