Is HMRC’s Crackdown on Tax Avoidance Putting the Pressure on SME’s?

 

There is no question that more aggressive measures have been taken to combat tax evasion, with over 100 new procedures being introduced by HMRC since 2010. Below, we take a look at some of the ways in which HMRC is combating tax avoiders or those unable to pay and what you can do if you find yourself on the receiving end of an investigation.

 

What is HMRC doing to target avoiders?

 

Technology

Advancements in technology have come a long way and this, coupled with additional power legislated by the government, means HMRC are in a stronger position than ever to identify and target tax avoidance. The improvement in their algorithms help to spot any anomalies in tax returns. HMRC may find that these anomalies are due to ‘deliberate errors’, where an inaccuracy was either intentionally made or the inaccuracy was known by the taxpayer but no effort was made to correct it. This can come with heavy fines. Penalties for deliberate errors have increased 34% since 2015/16.

 

Debt Collection

There are many ways HMRC can enforce payments on bills not paid, including:

• Taking court action
• Using debt collection agencies
• Recovering goods from business or residential premises to sell
• Deducting what is owed through earnings and pension
• Taking bankruptcy action
• Taking money directly from a bank account or building society
• Applying to the court for a winding up petition

According to research, in 2014 £6m was spent on private sector debt collection agencies by HMRC. This rose to £24m between 2016 and 2017. If you find that you are unable to pay your tax bill, then HMRC do have a helpline to advise on your situation and may help you to set up a plan of action which gives you more flexibility to pay. However, if a tax bill is ignored, then HMRC may be quick to pass your details to a debt collection agency.

If you find that you are notified by HMRC for an outstanding payment on your tax bill, you may be subject to a tax investigation. The requests for information and documents for this usually take many hours to compile ready for onward submission to HMRC and then there are all the follow up questions to respond to, potential meetings with inspectors to attend and then settlement of the investigation to negotiate. Investigations can typically last around 19 months and cost over £5,000 in professional fees.

 

At ER Grove we can support you if you ever find yourself as part of an investigation with our tax investigation service. The service is designed to provide clients with protection against the representation costs of an enquiry. If selected for an investigation or enquiry, we will defend you at no extra cost, if you subscribe to our Tax Investigations Service we will:

• Respond to HMRC on your behalf
• Deal with all correspondence
• Prepare and defend your case
• Negotiate the best possible outcome for you
• Provide help and advice in association with Abbey Tax

 

If you ever have any tax issues raised or are interested in finding out more about our Tax Investigations Service, then please contact us for further information.