HMRC are reforming the way that tax returns are conducted. Here are 5 helpful tips from tax experts Armstrong Watson about how to cope with the tax returns crackdown:
1. Bear in mind that HMRC has been targeted under the Government’s spending review commitments to bring in extra revenue of £7 billion a year. In order to achieve this, they have redeployed more than 5000 staff to tax compliance roles, thus increasing the number of taxpayers whose tax returns are chosen for enquiry.
2. HMRC have been criticised in the past for being unable to get their own statistics right after mistakenly announcing that they had raise more than £2 billion of their target in 2013, when their overall figure was actually closer to £100 million. Tax experts say that if HMRC cannot get their own figures right, how can you have confidence that they will get yours right under enquiry?
3. HMRC have recently announced changes in the way that they deal with any serious fraud enquiries by removing the right for the taxpayer to deny doing anything wrong, whilst wishing to continue to co-operate with HMRC as part of their enquiries. This means that HMRC have more scope to pursue higher punishments as well as criminal convictions.
4. HMRC do not require a reason to commence an enquiry into a tax return. They select a random number of cases each year to investigate.
5. HMRC enquiries can sometimes be protracted, occasionally lasting for a number of years and expensive in terms of fees. In 70% of cases, the legal fees outweigh the additional tax owed.
6. Armstrong Watson offers a Tax Enquiry Fee Protection service if you find yourself the subject of an enquiry which can help manage the costs of a long-running battle with HMRC.
If you’re self-employed, tax returns can be a minefield. To get some help with proceedings, call the Self-Employed Helpline.