Tax Investigations On The Rise

Small businesses are being warned to prepare for a call from the tax inspector, as a national “grab for cash” targets business owners.

HM Revenue and Customs (HMRC) are expected to massively increase the number of tax investigations they make, in a bid to reduce the tax gap – the difference between tax raised and what is thought to be owed – by £4 billion at the end of this financial year.

Cash businesses across the UK such as private taxi firms, pubs, corner shops and takeaways, are particularly vulnerable and should ensure they have all their books in order and answers ready.  The investigation insurance company, CCH, has already seen an explosion in new cases, with new claims up 82%* compared to the previous year and this is expected to ramp up even more in the next few months.

Business owners should not take this attack on their legitimate earnings and hard work lying down. If they ensure they have all the right procedures, records and proof of income and expenditure in place, they can show the tax inspector the door. They should also ask their accountant for fee protection insurance to cover the costs which could be run up in fighting any claims from HMRC.

Small businesses should follow five golden rules when the tax inspector calls:

• Challenge any part of the tax assessment you know is wrong
• Answer all correspondence from HMRC within their deadline – or fully explain why if you need more time
• Anticipate the inspector’s questions – if there is anything to declare do so early
• Ensure your tax advisor is experienced in negotiating with HMRC
• Appeal against any HMRC order to the independent commissioners within 30 days and go to the Tax Tribunal if you have a particular grievance

Businesses under investigation can see any documents held on them by calling the HMRC Data Protection Unit on 0191 225 7575.

 

Posted by Emma Clarke

* In the 2010/11 tax year to end August, CCH has seen new claims rise by 82% on the same period last year