This article is part of our Quarterly Tax Digest for individuals.
Last updated: 2 December 2020
By Howard Ledingham, Personal Tax Manager, Private Client team
Following Rishi Sunak’s statement in the March 2020 Budget, we have seen an increase in the number of tax enquiries for both individuals and businesses. This was to be expected; the Chancellor’s statement included the intention for a further £4.4bn of tax to be recovered in the next five years. With the huge amount of taxpayer money spent on schemes to combat the pandemic, the government will be looking to generate any additional funds possible; and they have never been in a better position to do so. With an ever increasing pressure on governments for greater transparency, information has never been more readily available. This mixed with Connect, HMRC’s computer system that pulls data from government, corporate and social media sources, mean there are very few places to hide.
HMRC has been vocal about the enquiries they have been making. Whether that’s regarding their tax evasion referral teams, or the thousands of enquiries they make each year into personal tax returns. It’s therefore becoming increasingly likely that you may receive a letter in the post from HMRC regarding your own tax affairs at some point.
Contrary to what many people think, it’s not just tax evaders that receive enquiries from HMRC. Anyone can receive an enquiry, even if you have reported all of your income correctly or have your tax return submitted by a professional. Unfortunately, no matter how big or small, this will come at a cost with professional fees.
It is possible, however, to mitigate the risks, and the first step is to obtain the services of a professional to prepare your tax return to minimise any errors or misunderstandings that might arise with you trying to complete the return yourself. In addition, fee protection insurance is available, such as the insurance that we provide from our external providers, to ensure you don’t find yourself with an unexpected expense you didn’t budget for.
If you do receive an enquiry, at Buzzacott we have a dedicated Tax Investigations team who can manage the enquiry process for you, ensuring the correct, optimal outcome is reached, relieving the pressure on you as much as possible. This will often involve reviewing the particulars of the enquiry and the element of your tax affairs that is being looked into. We’ll correspond with you and the HMRC inspector and deal with the negotiations regarding settlement, where this applies.