There’s little doubt that an urgency to replace depleted funds as a result of Covid-19 expenditure has increased pressure on the Government to recoup any underpaid tax.

In the first quarter of 2021, HMRC opened 102,000 compliance investigations - up 36% from the 75,000 in the final quarter of last year. In the spring, Chancellor Rishi Sunak announced £100m for a new Taxpayer Protection Taskforce to crack down on fraudsters who dishonestly exploited the Government’s Covid financial support schemes, including the Job Retention Scheme (JRS) and the Self Employment Income Support Scheme (SEISS).

These schemes have been a saving grace for many businesses and individuals, but there is no doubt that there will have been a mixture of misuse and mistakes since their introduction. Therefore, if you are aware of any errors in the furlough scheme or SEISS claims you have made, these should be disclosed to HMRC to mitigate any potential penalties.

Not only can tax investigations be a costly process, but they are incredibly time-consuming and can be very stressful too, often taking many months to conclude.

In addition to a review of the validity of claims under the Covid financial support schemes, HMRC could also extend or separately open enquiries to check your accounts and tax calculations, self-assessment or company tax return, and PAYE records, if you have employees. An inspector may ask to visit your home, business or an adviser’s office or ask you to visit them.

We have seen a significant increase in the number of individuals and businesses being faced with more extensive information requests into their tax affairs. Without an appropriate level of service protection in place, from the moment the dreaded enquiry letter arrives, professional fees are likely to be incurred and could escalate rapidly, as your advisers will be required to help the tax inspector understand your business records and explain any technical adjustments. It is also not uncommon for tax inspectors to change during an enquiry, which can lead to additional fees in assisting the new inspector to get up to speed.

Armstrong Watson provides an HMRC Investigation Service. As a member, the costs of having our tax experts defend and negotiate your position with HMRC are covered, resulting in no fee charged to you - potentially saving you thousands of pounds.

To find out more about our Tax Advisory and Investigation Services, please contact Andrew Mitchell on 07818 415469 or email andrew.mitchell@armstrongwatson.co.uk.