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In 2020/21, some 247,000 tax investigations were launched. This has increased steadily to 265,000 in 2021/22 and 299,000 in 2022/23, as HMRC seeks to grow its tax receipts.

Some £814 billion was recouped in tax revenues in 2021/22 by HMRC, £34 billion of which was achieved through its escalated efforts to investigate non-compliance and tax evasion across the UK. That’s enough to cover more than three-quarters of the country’s Defence budget in 2021/22.

The UK’s ‘tax gap’ – the so-called percentage of unpaid tax liabilities – has fallen markedly from 7.5% in 2005/06 to 4.8% in 2021/22. However, with the UK’s national debt climbing above 100% of the country’s Gross Domestic Product (GDP), HMRC is showing no signs of slowing down on narrowing that tax gap further still.

However, a recent Freedom of Information request from UHY Hacker Young found that approximately 267,000 of tax investigations into small businesses and self-employed professionals between 2019/20 and 2021/22 failed to yield a single penny in unpaid tax. That’s around two-fifths of all tax investigations launched by HMRC during this timeframe.

Earlier this year, HMRC launched a consultation on its collection of third-party data from banks and other financial institutions relating to the finances of individuals.

Margaret Curran, Technical Officer, Chartered Institute of Taxation (CIoT), said the trade body fears HMRC’s growing use of data will embolden the tax office to “broaden its information powers as a whole”.

Ms Curran insists HMRC should agree to a “more prescriptive approach” to obtaining third-party data, which would allow for essential parliamentary oversight and safeguarding for UK taxpayers.

Be prepared for an HMRC tax investigation into your business

HMRC has the power to launch tax investigations into any business or self-employed professional. Even if you’re confident your accounts have no unusual entries or errors, an investigation is always a possibility.

These investigations can last anything up to 18 months and can bring a great deal of stress and anxiety to your everyday life.

For a small annual fee, we can provide a Tax Investigation Service. In the event your tax affairs are investigated by the tax authorities, they can work with you to oversee the investigation and seek counsel from tax experts where necessary. All of which is covered by that one-off annual fee.

To discuss our Tax Investigation Service – also known as Fee Protection – in more detail with your local TaxAssist Accountant, call our friendly and experienced team today on 0800 0523 555. Alternatively, you can drop us a line using our online enquiry form to outline your situation and we’ll respond as quickly as possible.

Date published 30 Aug 2023

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