Tax and VAT Investigations
The number of both tax and VAT investigations conducted by HMRC is increasing, meaning that the chances of being involved with one is becoming more likely.
HMRC are actively identifying and targeting areas where they believe that tax is at risk – particularly for non-compliance issues and tax evasion.
Any HMRC return could result in one so it’s important to consider what you would do if you were selected. It’s not just the stress involved but also the time that it takes to challenge the investigation as well as the additional costs – as even if you’ve done nothing wrong, having an investigation would not be covered by your usual accountancy fees.
So why are they increasing?
It is estimated that there is a £33 billion tax gap between what HMRC should be collecting and what they actually collect. Tax and VAT investigations are a key tool in reducing this deficit and HMRC has recruited more investigators to handle them.
How we can help
At PKF Francis Clark, we have a team of tax and VAT investigations specialists – many are ex-HMRC officers and therefore have an excellent working knowledge of HMRC practices as well as what an inspector can and can’t do.
Unfortunately the attitude of the inspectors is becoming more aggressive as they seek deliberate penalties and our team will often correct officers where they work outside the parameters of an enquiry or fail to follow the correct procedures when conducting their investigations.
This knowledge is invaluable when faced with an investigation and along with being able to identify key areas of an investigation, can be crucial to bringing the challenge to a successful and quick conclusion for our client.
From liaising with HMRC on small local compliance enquiries and all the way to preparing cases to be heard at the First tier Tax Tribunal – our team have the expertise to help you.
Our main areas of expertise are:
This means that HMRC are making an allegation of deliberate or fraudulent conduct in not paying the correct amount of tax. Therefore, you urgently need to seek help as soon as possible.
COP8 enquiries will usually involve larger transactions, tax avoidance schemes or offshore transactions. This is different to suspected deliberate inaccuracies in business records or undisclosed capital gains, where a COP9 notice would be served instead.
Whilst relatively rare, HMRC don’t give much time to respond to a notice that you are being under an investigation. We can discuss the steps that you should take to respond in the correct way and to avoid an arrest warrant being issued for non-compliance of the notice.
We can help in making a disclosure to HMRC of previously undeclared overseas income or gains and advise on the potential settlement payable to HMRC, to include late payment interest and any penalty that may be payable.
Anyone who does not make a disclosure to HMRC will be liable to even higher penalties and the potential for prosecution, therefore it is still important to come forward before HMRC investigate your affairs.
there are currently just two voluntary disclosure facilities to encourage taxpayers, who have been non-compliant with their tax affairs, to come forward and make a disclosure. These are:
- Let property campaign
This gives the opportunity to bring a person’s tax affairs up to date if you’re an individual landlord letting out residential property in the UK or abroad
- General voluntary disclosures (digital disclosure service)
HMRC also offer a disclosure service for anyone who needs to make a disclosure for non-deliberate tax errors where a tax liability has arisen. This service should not be used where there has been a deliberate or fraudulent evasion of tax; in these circumstances, you need to consider whether to make a voluntary disclosure under Code of Practice 9
Relating to HMRC enquiries into issues of a person’s residence or domicile
Employer compliance visits and enquiries are one of the more common types of HMRC intervention.
We can help dealing with these visits, as well as follow up enquiries and negotiating settlements with HMRC. We can also review your PAYE schemes and benefits and expenses procedures to make sure that all liabilities are being correctly recorded on a P11d and advise where further checks and safeguards can be put in place.
Employment status and IR35 enquiries are often triggered as part of, or as a result of, an employer compliance check. With the introduction of specific public sector IR35 rules (and the rollout to the private sector in April 2020), IR35 has never been more in the spotlight.
VAT investigations happen when HMRC conducts enquiries based upon their perception of VAT compliance risk that a business represents. They will already have established what they want to check in advance of their first contact, using their vast array of data sources, to include bank records, payment card receipts and expenditure, third party data from on-line retailers, information supplied to other government departments and overseas jurisdictions, along with any other tax return information or benefits claims that are made by a business or those connected to a business.
Our experts, including former HMRC VAT inspectors take full advantage of the HMRC review and alternative dispute resolution stages, often overturning or significantly reducing HMRC VAT assessments before taking cases through to the VAT & Duties Tribunal if an impasse is reached.
If HMRC initiate a VAT inspection or if you feel that a pro-active review of your VAT activities would reduce the risk of future difficulties with HMRC, we strongly recommend that you contact our VAT Investigations Team at the earliest possible stage.
Extra peace of mind with tax investigations insurance
It’s not just the stress and worry that comes hand in hand with an HMRC investigation. It’s also the time that it takes and the additional associated costs that can soon add up, as a tax investigation is not covered by your usual accountancy fees.
We have partnered with Croner Taxwise to provide our clients with tax investigation insurance. With this cover, you will benefit from:
- People you trust – you will still be working with PKF Francis Clark who will work with you to manage the tax investigation, not an unknown organisation. With ex-HMRC staff working for us, we understand how investigations work
- Peace of mind – knowing that professional fees of up to £100,000 are covered by your Croner Taxwise insurance policy
- A reactive team – we can respond straightaway and often early intervention can lead to an early resolution
- Access to employment law advice – an added benefit as many smaller businesses don’t have internal HR departments
To benefit from this insurance or you would simply like to find out more, please speak to your usual contact at PKF Francis Clark.
Meet our full team of Tax and VAT investigation specialists and find out more about our Tax lead (Chris Watts) and VAT lead (Simon Anslow) below: