HMRC Investigations Recover Billions in Unpaid Tax

According to analysis from the law firm, Pinsent Masons, HMRC recovered £4.9 billion from tax investigations into businesses during the 2018-19 period. A good chunk of this figure, £1.2 billion, was from underpaid income tax.

The law firm went on to say that HMRC has spent £309 million on conducting these investigations. But incredibly, they’re getting a yield of £16 in recovered tax for every £1 spent on the investigations.

Why Is HMRC Investigating Small Businesses?

Over the past few years, many have called for greater scrutiny of large international corporations and their tax affairs – particularly after the Panama and Paradise Papers leaks. However, the high return on recovered tax for smaller businesses is hard for HMRC to ignore.

HMRC’s Individuals and Small Business Compliance department (ISBC) manage the tax compliance of any company with fewer than 20 employees and an annual turnover below £10 million.

With HMRC managing to recover so much in unpaid or underpaid tax, it looks like they are only going to continue their focus on small businesses and individuals.

Steven Porter, partner at Pinsent Masons said: “For HMRC, this is an outstanding result. These returns will spur HMRC on to do more – taxpayers can therefore expect more attention and more investigations.

“Individuals and small businesses are more vulnerable to tax investigations as they are less likely to have access to advisers who can shut HMRC down.”

Self Assessment Tax Return Issues

In many cases, the underpaid tax isn’t a case of deliberate tax avoidance. A lot of the time it’s down to simple mistakes. These mistakes then get out of hand and lead to incomplete or incorrect tax return submissions.

When HMRC investigates mistakes, they will look into previous years of accounts and this increases the likelihood that they will discover more errors.

This typically happens when the director themselves or another employee has been tasked with managing the accounts. This, paired with their regular responsibilities, increases the risk of mistakes. A simple mistyped figure in an inputted transaction can affect your figures at the end of the year. In this case, it can be very difficult to find the problem if your bookkeeping system hasn’t flagged up the error or you haven’t noticed it personally.

That’s why it’s so important to have help at hand from a professional accountant. It’s too easy to make a mistake on your tax return or bookkeeping records which could lead to an investigation.

The danger of an HMRC investigation is that you could face fines with fines. This is on top of the extra tax that you owe. Besides this, investigations can be time-consuming and highly disruptive to your business which could affect your overall growth and productivity. It’s not something that any growing business will want to deal with.

Get Help From a Professional Accountant and Bookkeeper

With a professional Accountant and bookkeeper, your worries can be alleviated. They will ensure your records and submissions are 100% correct. An accountant will also be able to represent your interests to HMRC on your behalf and will deal with them directly.

If you need help for your businesses, Countplus covers a range of accounting, tax and legal services. For a free quote and a no-obligation chat, get in touch today.

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