Focus tends to be on large companies when it comes to maximising tax yield, particularly in HMRC investigations. Recent figures, however, show that the Revenue’s efforts at the lower end of the scale have been reaping rewards for the Treasury.
Changes to data driven methods of investigation into individuals and small firms clawed back £4.9bn in extra tax in 2018/19, according to research from law firm Pinsent Masons. The ratio gain for HMRC was £16 for every £1 spent. This level of return on effort means that investigations into smaller misdemeanours and mistakes may become both easier and more fruitful for HMRC to pursue.
The section responsible is HMRC’s individuals and small business compliance directorate. They define small business as a company with an annual turnover of under £10m and fewer than 20 employees. Individuals filing self-assessment tax returns are the other focus of the unit’s effort. A mistake on one return can trigger an investigation in previous years’ returns, with the potential for penalties or unpaid tax demands.
At the other end of the scale, HMRC’s additional powers under corporate criminal offences legislation now have nine firms under investigation for failing to stop the facilitation of tax evasion. These are the tip of a tail that could run to another 21 firms across multiple sectors including financial services, software development, construction, oil and labour provision.
While there are yet to be any convictions under the legislation, HMRC is tackling fraud and evasion with increasing success. The Fraud Investigation Unit netted £5.4bn in 2019 following thousands of civil and criminal investigations.
Whether you’re an individual, small firm or a large company, HMRC is now able to request and receive documents and data that could result in payments of extra tax or worse.
Taking care to ensure that everything you submit around your tax responsibilities is correct is the best way to keep any investigations at bay. And of course, if you are in on the receiving end of queries from HMRC, make sure you get in touch with one of our Chartered Accountants on 0114 266 4432 or [email protected]