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The risk of a tax enquiry – how to protect yourself and your business

Tax enquiries are on the increase, the bleak economic climate has left the UK tax system in crisis, and the Government is using all available means to raise additional funds.

• The Government has given HMRC £917 million to tackle the ‘tax gap’, and raise additional revenue of £7 billion a year by 2014-15.

• HMRC has recruited more than 2,500 new tax compliance officers.

• HMRC will conduct 20,000 Business Records Checks this year alone.

An enquiry can cause a great deal of personal stress and can incur a lot of professional fees in fighting your case, even if you have nothing to hide.

How can you protect yourself against a Revenue enquiry?
Here’s my advice.

1. Keep up to date. Filing late increases your chance of an enquiry. If you are preparing a tax return that is several months old, how can you be sure it is accurate?

2. Pay your tax on time or, if you cannot settle the amount due, speak to the Revenue at the earliest opportunity and explain your position.

3. Keep very good accounting records. You should have these anyway to run your business effectively.

4. Keep a diary and note down any exceptional transactions. You may have made a sale at a very low mark-up, or there may be particular reasons for a very profitable sale. Your accounts for tax purposes  show only annual figures; results that are different from earlier years could lead to an enquiry. A note made at the time is very powerful in defending your case and is an excellent memory jogger to explain fluctuations in profits.

5. Do not talk about your tax affairs to all and sundry. The Revenue does act on ‘tip offs’ from disgruntled staff, partners and business associates.

6. Always speak to your accountant or tax adviser if you are unsure about something.

7. Consider fee protection insurance to cover the cost of professional fees to deal with a Revenue enquiry.

Even if you are completely innocent, you could still be the subject of an enquiry
Despite taking every effort you can still be the subject of an tax enquiry.

I think the link below from the Daily Telegraph gives excellent advice on what to do if you are experiencing a tax enquiry.

Daily Telegraph article

Fee protection insurance
The problem with any tax enquiry is the cost of dealing with the enquiry. Typical tax enquiries require 19 months of professional representation and cost at least £5,000.

We have devised a new service in conjunction with one of the UK’s leading fee protection insurers. This service provides you with an expert technical defence from tax specialists and enables us to:

Provide you with full professional representation in the event of a tax enquiry

 Deal with the tax authorities on your behalf

 Handle all correspondence and meetings with the tax inspector and negotiate the best possible result for you

More information about the service is available on request but please let me know if you have any questions.

I strongly advise that all clients subscribe to the service due to the increasing risk of enquiry.

Directors or partners of a subscribing business will automatically get protection for your own personal Return, making the annual fee excellent value for money.

The protection includes VAT and PAYE enquiries as well as Income Tax and Corporation Tax enquiries.

Please contact us to join the service. A typical fee for a company is only £160 plus VAT a year.

Countless businesses are forced to surrender to HMRC’s demands as they cannot afford a proper defence. Subscribing to this Service ensures that you’re not one of them.

2 Responses to “The risk of a tax enquiry – how to protect yourself and your business”

  1. Thanks for an interesting article. Could you please send me the details and a price for this service.


  2. Andrew Scott says:

    Thanks for your comment George. The typical fee for a limited company client including the directors personal tax is £160 plus VAT.

    There may be additional premiums to pay if the director has rental income or self employed income.

    If you are a director of several companies then you will need to pay premiums for each company.

    The cover also includes a Business Legal Helpline

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