Tax Investigation is on the increase with HMRC cracking down and increasing the amount of people that are investigated each year.
Do you know the effects a tax investigation can have on your business?
The Daily Telegraph recently reported that the amount of tax collected from investigations, into self-assessed individual tax payers stood at £845m in 2013/14, compared with £609 million in 2012/13, an increase of 39%. Since 2007 the amount of tax-take from personal tax investigations has risen each year, but since 2012 has nearly doubled.
As well as the tax-take rising, the number of investigations carried out is also increasing. Figures obtained by the Telegraph in May 2014 found inquiries about the tax affairs of 237,215 people last year, compared with about 119,000 in 2011-12. HMRC refused to disclose how many investigations had been made in 2013-14.
HMRC are casting a wider net and and targeting a broader range of taxpayers. It appears that a more “heavy handed” approach is being used by the taxman in order to catch an “average taxpayer”. An example of HMRC’s tougher stance is the fact that the number of prosecutions against tax evaders has significantly increased, from 165 people being jailed in 2010-11 to 1,165 in 2013.
Furthermore when it comes to deciding who to investigate the taxman is not allowed to engage in “fishing expeditions”. Instead HMRC must show evidence to justify wider inquiries collating as much information as possible from third parties, such as banks and local councils, before proceeding with an investigation. Any form of investigation by the tax authorities, whether it is an inquiry about some aspect of your tax return or a full-blown investigation into your wider financial affairs, is a potentially stressful and expensive process.
So think how would you deal with being investigated? Have you got the resources to pay for this if it happens?
Stafford and Co would love to hear your thoughts, so please comment and share.
Source – Summary of article by Kyle Caldwell published in the Telegraph on 18 November 2014