HMRC enquiries into individuals and businesses are carried out each year in order to ensure that they have paid the right amount of tax. Since 2010 HMRC have strengthened their approach and we have observed a general trend which has displayed a year-on-year increase in the number of tax enquiries opened.
COVID 19 & HMRC Enquiries
The pandemic in 2020 was unprecedented in so many ways for both individuals and businesses. When the first lockdown hit in March 2020, along with the majority of the country HMRC found themselves adapting to working from home. With operatives unable to undertake face to face compliance work and given that politically it was not the time to actively pursue taxpayers, compliance work was largely suspended.
However, this period merely represented the calm before the storm. In order to fund the enormous spending throughout the lockdown, there would eventually be pressure on HMRC to generate more tax. As well as a need to check that the measures put in place to support the economy had not been abused.
An Increase In Tax Investigations
The provider of our HMRC Investigation Tax Fee Protection Scheme, which covers the professional fees that we incur whilst dealing with such HMRC enquiries, has seen this play out in recent months. The number of claims from tax enquiries has quickly increased since May 2020 and now exceeds pre-covid levels. HMRC is targeting its investigations into all aspects of taxation, but specifically, they are targeting any type of repayment claim as well as taxpayers that have used the Coronavirus Job Retention Scheme (Furlough).
When it comes to enquiries into furlough claims HMRC will typically put the onus on the taxpayer to demonstrate that their claim was credible. In the first instance, HMRC will write to the taxpayer confirming that they believe they need to repay some or all of a CJRS grant received. This is because they may have claimed for more grant than they are entitled or not met the conditions for the grant (e.g. by including employees who are not eligible). At this point, taxpayers are given the opportunity to voluntarily make a repayment, without any penalty from HMRC.
Wherever HMRC undertakes such checks and it is necessary for us to be involved, the enquiry will be covered by our Tax Fee Protection Scheme (subject to the normal terms and conditions). As you would expect where a claim is fraudulent or contains significant inaccuracies it will not be covered by the scheme.
What Is Our Tax Fee Protection Scheme?
The Tax Fee Protection Scheme provided by K.A.Farr & Co Tax means that if you are selected by HMRC for a tax enquiry, we will robustly defend you against any unjustified questions. HMRC enquiries can be detailed and very time-consuming. Even if no extra tax is payable, the cost to your business can be substantial. However, with the Tax Fee Protection Scheme from KA Farr & Co, the cost of our time is covered by your premium.
Our standard annual fees do not cover the additional professional costs of handling HMRC enquiries and compliance checks. We strongly recommend that you are protected against such unexpected costs by taking out Tax Fee Protection.
In the recent budget, the government announced that they will invest over £100m in a task force to combat the estimated £3.5bn fraudulent claims made in respect of Covid-19 support packages. The task force will target CJRS, the Self-employment Income Support Scheme and will manage bounce back loans. It, therefore, appears that the surge in HMRC activity will undoubtedly continue in the coming months. Against this backdrop, the protection afforded by our Tax Fee Protection Scheme will have more value in 2021 than ever before.
Our Tax Fee Protection Scheme will protect your business against fines from HMRC
Our Tax Fee Protection scheme renews on the 1st of August and if you are not currently protected by our scheme you will have an opportunity to purchase this protection then, alternatively you can contact us for details on how to join the scheme prior to the renewal date. If you are currently protected by the scheme, then we strongly recommend that you take the opportunity to renew this protection when the time comes.
If you would like more information about the policy, you can find a sample summary of the cover here Tax Investigation Cover.
Let us take care of it for you
We can answer any questions you may have regarding the cover and our services. If you would prefer to contact us by email you can do so at firstname.lastname@example.org