Businesses across London, Essex and beyond need to be prepared for a potential tax investigation, according to Haslers Chartered Accountants.
As the nation recovers from the impact of COVID-19, HM Revenue & Customs has started to ramp up compliance checks and tax investigations as the Treasury attempts to recover the substantial costs of the pandemic.
Last year saw a dip in the tax authority’s investigations as it also dealt with the challenges of Coronavirus.
For example, it conducted 75 per cent fewer Stamp Duty Land Tax investigations, according to figures obtained by law firm Boodle Hatfield.
However, in recent weeks many taxpayers have received nudge letters relating to overseas income and compliance checks for schemes used during the pandemic, like furlough and the Self Employment Income Support Scheme.
“More than 3,000 reports have been received by HMRC about potential furlough fraud and it is said to be investigating many other cases where its investigators have uncovered over payments to employers,” said Jon O’Shea, Haslers’ Senior Tax Partner.
“It is also currently running a campaign around overseas income and sending letters to many taxpayers based on the information it has received or discrepancies in tax data from other authorities.”
Jon said that HMRC’s tax investigation services had become more effective thanks to its increased use of technology and collaboration with other authorities in the UK and around the world.
Taxpayers can face substantial penalties if they are found to have undeclared income or if they have used COVID-19 support mechanisms inappropriately.
The level of penalty can be up to 100 per cent of the extra tax due, depending on whether the act was deliberate or if the taxpayer notified HMRC first, as well as the length of time that has passed.
Jon said mistakes could be easily made, especially as many businesses adapted quickly to the changing rules last year. He added: “When it comes to tax investigations, honesty is often the best policy. HMRC operates several disclosure facilities that can substantially reduce any penalties issued.
“Waiting for the tax authority to make the discovery rarely works in a person or business’s favour and so we are offering our advice and support to those in need of help.”
Businesses contacted by HMRC for an enquiry or compliance check should seek professional tax advice as soon as possible, as they only typically have 30 days to respond.