Avoiding a Tax Investigation

Highly experienced, commercial accountancy expertise

Why does an Investigation Happen?

HMRC may identify tax issues from information they have collected from third parties or from their own investigation and analysis using their Connect computer system, or they may arise from a routine PAYE or VAT visit.

The main types of errors which cause enquiries and investigations are:

1) A simple recurring error in the way that transactions are processed in a business, for example applying the wrong VAT rate.

2) A one-off error relating to a routine expense, such as mistakenly claiming a deduction for a disallowable expense

3) A one off error relating to an unusual transaction, such as incorrectly claiming entrepreneurs’ relief on the sale of a business, failing to apply PAYE to a share transaction, or failing to correctly account for VAT/capital allowances on the sale of a commercial property.

If an error is identified, it can either be rectified or, if required a disclosure can be made to HMRC.

4) Deliberate tax evasion.  We are unable to assist in cases of deliberate tax evasion.

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PAYE Health Checks

Whilst an HMRC visit will consider the basic operation of the PAYE system, a significant part of it will be spent looking at expenses and benefits provided to employees and also considering the operation of any share schemes.

Our PAYE Health Check is based on the checklist used by HMRC during their visits.  Whilst we will look at the basic operation of the scheme, since that element is now normally either outsourced or produced automatically, our main focus will be on benefits, expenses, non-employee workers and share schemes, which in our experience is where most problems arise.

VAT Health Checks

Our Health Check looks at the operation of the VAT system in your business.  We consider all the types of supply made by your business (including reverse charge supplies) to ensure output tax is being accounted for correctly.  We then look at the recovery of input tax and any partial exemption restriction as well as the VAT treatment of any properties and the operation of any VAT schemes.

As for PAYE visits, it is common for errors to be identified during HMRC visits and so our Health Check will look at the same sorts of areas as HMRC would look at during a visit, with a focus on the areas of highest risk.

One-Off Transactions

We can advise on the tax consequences of a transaction and if/how it is required to be reported to HMRC.  If there is doubt as to the tax consequences, it may be possible to apply to HMRC for clearance.

Whilst advice after the event is better than no advice, it is far better to seek advice before the transaction takes place.  There are two reasons for this:

1) There may be tax consequences requiring to be dealt with immediately (for example to charge VAT or account for PAYE), or within a very short time thereafter (14 days for a “s431” election to ignore restrictions attaching to shares).

2) There is some clarity as the full commercial impact of a proposed transaction, for example if it is assumed that entrepreneurs’ relief is available, but it turns out that it is not, the tax charge doubles from 10% to 20%.  This may affect the decision to proceed with the transaction, or require the transaction to be structured differently.

Keeping on top of the information HMRC may request and ensuring processes used to store the information have been reviewed, means that should an investigation arise, an recent information or historical information can be quickly sourced and the quality can be assured. Issues can develop an there can be an impact on time along with penalties and interest charges if there are gaps in the information requested.

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Call us on 01628 770 770 for a no-obligation chat


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Find out more information about Tax Investigations:

At our core is an understanding what our clients need and value – after all we’re an ambitious business ourselves.  We advise our clients the way we would wish to be advised.  Our values that shape and define the character of our business are usually shared by our clients. Review our accounting and business services for Businesses in Maidenhead.

Meet the Wilson Partners team

For more detailed information and a meeting to discuss your accounting and finance requirements, please call us on: 01628 770 770 or email:[email protected]

Call us on 01628 770 770 for a no-obligation chat

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