HMRC’s tax compliance checks don’t necessarily mean a negative thing for a business. Even though tax inspections are often a result from a discrepancy, these checks are also done randomly.
However, the worst thing that these could lead to are prosecution and jail. In 2014, there was an increase of 29% in HMRC prosecutions.
Here are steps to help with the experience of a tax enquiry.
Step one: to keep calm
Pillow May Chartered Accountants’ Jessica Pillow warned businesses not to give in to pressure and to not risk getting in touch with the revenue very quickly. She said that the letters can seem threatening or even casual to merit a quick response.
An HMRC spokesperson mentioned that the HMRC is there to give the proper support to the businesses who are really trying to have their taxes right. They have amended their channels where business are able to contact and get guidance.
Step two: to understand the level of enquiry
There are three categories for enquiries. They are aspect, full or random investigations. In aspect enquiries, a business’ tax information area or more are re-evaluated. Full enquiries evaluate a whole business’ tax return. Random enquiries evaluate the tax returns across areas which are thought of as higher risks and SMEs are specifically targeted. All enquiries need to be treated with an equal level of seriousness.
Step three: to get an accountant
It is best to get an accountant before any contact with the HMRC. According to Steve Pipe, an accountant will ensure that things needed to be done are done on time with minimal stress.
HMRC also suggested that the small business owners should seek for expert help to reduce the potential damages.
Step four: to talk with HMRC
When there is already appropriate help, the accountant should now be able to contact the HMRC in behalf of the business owner. Also, keep in mind that anyone has the right to ask questions or enquire throughout the investigation when things are getting confusing.
Since governments are increasingly doing tax investigations, it is important for both a business to secure an insurance against tax investigations and for an accountant to avail of an accountant professional indemnity insurance. This insurance was specifically designed for protection from tax enquiries and its associated risks.