HMRC gained almost £5bn from tax investigations into individual tax payers (those who fill in self assessment tax returns) in the 2018/19 tax year. A Freedom of Information request found that on average, HMRC earns around £16 for every £1 it spends on staff costs for these types of investigation, making it an increasingly efficient way for them to collect funds.
The biggest cause of these investigations? errors on Tax Returns. HMRC uses a multi-faceted approach to compliance amongst individuals and cross checks information from a vast amount of sources including tax returns, property and financial data.
One error, no matter how small, means they have the capability to ‘investigate’ your financial affairs for any given tax year. They don’t just stop there though, if they find an error, they are entitled to go back a minimum of 6 years. In some cases, they have been known to go back to the start of trading. They also have the power to randomly select tax payers for an investigation, whether you made any actual mistakes or not.
With individual tax payers seen as easy pickings by HMRC, tax investigations look set to surge in the coming years, particularly with the launch of Making Tax Digital in 2019.
But what can you do if you received the dreaded ‘investigation’ letters from HMRC? Well, worry not. If you have an Agent, such as ourselves, part of our job is to deal with HMRC on your behalf, so you can leave the stress to us, while you do the important things, like running your business. We will keep you on the right track, so even if you are unlucky enough to be investigated, we do all the hard work for you.