HM Revenue and Customs (HMRC) has announced it is seizing more from its tax investigations into individuals and small businesses, with £18 collected in additional tax for every £1 spent by local compliance teams in 2013-14.
This figure is up from the 2012-13 tax year, which saw £16 gathered for every £1 invested by local compliance teams.
In total, £8.9 billion was retrieved in additional tax from local compliance investigations in 2013-14; up from £7.8 billion in 2012-13.
It’s likely that HMRC will continue to invest in tax investigations undertaken by its local departments.
Subsequently, an increasing number of entrepreneurs and SMEs are likely to find themselves under the watchful eye of compliance teams in the coming months.
The tax authority is no longer focusing solely on high net worth individuals with funds held offshore or traditional cash businesses.
For instance, HMRC’s ‘Second Incomes Campaign’ targets those with multiple revenue streams, such as private tutors and online traders; while voluntary disclosure schemes have also been launched in specific job sectors to encourage professionals to divulge their income.
This new aggressive approach means it much more likely that clients could end up on the receiving end of an HMRC tax investigation.
How to avoid an investigation by HMRC
The best route for avoiding an investigation would be to employ the services of an accountant to ensure your self-assessment returns are accurate and compliant.
TaxAssist Accountants use specialist software to analyse tax returns to check for anything which may arouse suspicion from HMRC.
Nevertheless, random investigations are unavoidable and even if there are no unusual entries in your accounts or tax returns, it’s still possible for your tax affairs to be scrutinised.