HMRC Enquiries are Driving Increasing Tax Revenues
The announcement that HMRC have raised £23.9bn in additional tax during the 2013/14 tax year from tax investigations inspired us to examine our own client experience in the light of this crackdown on tax avoidance and non-payment of tax. HMRC said of the total amount it had raised, more than £8bn came from large business, £1bn from criminals and £2.7bn from tackling avoidance schemes in courts.
The Private Client tax team at WSM has certainly noticed a significant rise in tax enquiries over the last three years and it is clear that no one is immune from selection. HMRC have the right under Section 9 of the Taxes Management Act to check any tax return, at random, including those in which everything appears to be in order.
However, most enquiries are selected according to risk; for example on the basis that there is significant tax at risk or a suspicion that something is wrong. HMRC do not say whether a particular enquiry was selected on risk or randomly, but may identify particular areas on which the enquiry will focus but they must notify a taxpayer in writing that an enquiry is being made and in general must do so within twelve months from the date that the return is delivered.
Some enquiries simply question obvious errors that were not identified during the initial processing and some merely require a straightforward clarification of a single item in the tax return. Others comprise a more detailed examination of some technical aspect of the tax return, for example, whether a particular expense is allowable for tax purposes and in some cases the enquiry involves a full in-depth review of the taxpayer's affairs including the records underlying the entries in the tax return.
It is difficult to extract precise figures regarding enquiries but an examination of the table of Income Tax Receipts published by the Office for National Statistics shows that while PAYE receipts increased by some 8% between tax years 2009/10 and 2012/13, tax receipts in the 'Other Receipts' category, which crucially includes receipts from investigation settlements, increased by almost 66% over the same period.
Since 2010, HMRC have also set up task forces to focus on tax evasion in sectors of the economy ranging from medics and plumbers to restaurant owners and door-to-door sales people. In total, HMRC has said it expects to secure £100bn between May 2010 and March 2015 as a result of its investigations into unpaid tax.
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