Increase in investigations?
There has been some press speculation recently that HMRC is looking to close down enquiries, in as short a time as possible, with a view to advancing tax receipts. Whilst this may seem to be good news in terms of reduced fees, the potential downside is likely to be a lack of time and consideration from the Inspector demanding more time from advisers trying to sort matters out. In parallel with this, it appears that HMRC is looking to raise a high number of limited scope enquiries, which are expected to yield a better cash return in the short term.
I am not sure how this ties in with HMRC being short staffed and under pressure, but if the rumours are true, it looks as if resolving queries (and processing claims for repayments / reductions in tax?) will be pushed even further back down Inspectors' lists of things to do.
Whilst I appreciate that a demand for cash returns, as quickly as possible, was only to be expected, none of the above sounds like good news, particularly for businesses already facing cost pressures due to the current state of the economy.
This leads to the obvious question, “is there anything you can due to reduce the risk of being picked for an enquiry (other than hope)?” Here are a few suggestions:
- keep your tax affairs up to date
- avoid obvious errors
- include, in the computations, adequate explanations of items that may vary from one year to the next (such as large fluctuations in GP%).
Now may be a good time to consider taking out fee protection policies as these can be a very efficient way to cover the cost of an enquiry.
Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.
Date: 16th July, 2010
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