Firms warned to act now as taxman ramps up investigation activity

Tax investigation activity is on the rise, triggering a hike in businesses and individuals seeking support, accountants have said.

Experts believe that this trend is expected to continue with Chancellor Rishi Sunak also announcing the launch of a coronavirus fraud team within HM Revenue and Customs Tax officials estimate that up to 10 per cent of furlough cash may have been claimed fraudulently, a sum now equal to more than £5 billion.

Anderson Anderson & Brown (AAB), the Scottish accountancy and business advisory firm, said it had experienced a significant increase in new enquiries across multiple areas and in particular business tax investigation enquiries have increased by 50 per cent in the last six months.

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The firm’s specialist tax investigations team believes that this is in part due to evidence of HMRC’s renewed focus on tax investigations.

Lynn Gracie and Stuart Petrie of Anderson Anderson & Brown (AAB), the accountancy and business advisory firm.Lynn Gracie and Stuart Petrie of Anderson Anderson & Brown (AAB), the accountancy and business advisory firm.
Lynn Gracie and Stuart Petrie of Anderson Anderson & Brown (AAB), the accountancy and business advisory firm.

Several areas have fallen under the taxmans’s glare, including overseas income and gains, large multi-taxes investigations into businesses, and fraud probes into company directors and the self-employed, following a pause on this activity during the height of the pandemic.

Alongside these relatively new types of investigations, HMRC routinely opens hundreds of employer compliance reviews every year across a vast array of business sizes and types, and now these could include questions around any furlough claims made by employers, AAB warned.

Stuart Petrie, director and head of tax investigations at AAB, said: “The last year has been exceptionally challenging, and whilst the various Covid support measures introduced by the government have been welcomed, the changes, extensions and volume of different measures may have resulted in errors which could lead to potential investigations.

“HMRC has wide-ranging powers which enables it to enquire into the tax affairs of any business and, due to the increasing volume of third-party data they are able to obtain, more and more investigations are being opened.

“Investigations can be complex, and we expect this to increase, particularly with HMRC’s Covid fraud team being introduced.”

Lynn Gracie, private client director at AAB, added: “Individuals with assets overseas need to be aware that since the advent of international tax transparency, HMRC now has visibility of data across more than 100 jurisdictions and is processing unprecedented amounts of data provided to them by overseas countries.”

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