Update on HMRC Investigations and our Tax Investigation Service

It is no secret the UK has a huge budget deficit. The pandemic followed by the current cost of living crisis is increasing this deficit literally by the second.

One of the more politically acceptable ways to help reduce this deficit is to carry out tax investigations into both businesses of all sizes and individuals. HMRC like to point out that they are only looking to collect the right amount of tax. However, the selections criteria appears to be something of a blunt instrument. Our tax fee protection insurers (PFP) tell us over 30% of cases they see have a nil settlement. Over 70% incur more in fees than HMRC collect in tax, interest and penalties combined. This only goes to show HMRC investigations do not only go for those who have something to hide but pick up a whole myriad of taxpayers (so called customers) for tax investigations.

Most of the public have no idea the amount of detail HMRC have on us all – and we do mean ALL. They have a super computer – called the CONNECT system. It is estimated to hold over 20 billion items of information. They can enter a person (or business) name and get a printout of all items connected with them. E.g. bank interest, bank balances, postcodes through the electoral roll, council tax, land registry, mobile phone contracts, even chip and pin transactions. Most people are unaware HMRC are told every time they leave and enter the country.

Information is also being exchanged with over 130 countries worldwide.

There is an old saying about IT systems – rubbish in rubbish out. It is simply not possible for all 20 billion plus pieces of information to be correct and it isn’t. According to PFP what this means is that not only are they seeing more enquiries but also more unexpected enquiries.

Even if no specific information is held they can select cases purely at random.

To cap it all, once selected for enquiry clients still have to pay for the accountancy fees incurred even if totally exonerated. As PFP have said, the involvement of expert advice cannot be undervalued and can save clients many thousands of pounds.

It was for this reason we started our Tax Investigations Service for clients. To help them in the event they are selected for enquiry. This is backed by PFP and includes cover against most types of HMRC enquiry. Our clients have received considerable assistance from this service over the years and we would encourage all clients who haven’t considered membership should now do so. In these tough times we are concerned clients will be faced with unexpected fees and, even worse, face higher tax bills they cannot fight!

For more details of how you can subscribe to our service, please do contact your usual GE contact.