HMRC are to restart their enquiries following the brief pause which was put in place due to COVID-19. The new remit of the investigations will include whether employees broke the rules and worked whilst being furloughed.
When will HMRC restart their investigations?
Following the introduction of a nationwide lockdown in the UK due to the global pandemic, HMRC provided tax payers with a brief respite from investigations. This period now seems to have come to an end with Blick Rothenberg stating that HMRC enquiries into taxpayers’ affairs were restarting as a “matter of urgency” and with “renewed vigour”.
Why are HMRC restarting their investigations?
The assistance Government has provided to businesses and individual taxpayers in recent months have been costly and they will want to ensure that borrowing requirements are not exacerbated by taxpayers who are not paying the correct amount of tax.
There is no doubt that HMRC will be under pressure from Government to look at anyone who they think is defrauding the system as a matter of urgency.
What investigations will HMRC be focussing on now?
On 20 March 2020 Rishi Sunak, the Chancellor of the Exchequer, announced various financial packages aimed at alleviating the pressures caused by COVID-19 such as the introduction of the the furlough scheme, which is costing the UK government roughly £14bn a month.
This will therefore be one of the focusses of HMRC investigations, to ensure that those who were not supposed to be working during furlough were complying with the law. They will also be looking at other areas which have seen a surge in activity such as internet trading whilst the lockdown has been in place.
In addition to this to the, it is understood that HMRC have also been given the go-ahead to start new Code of Practice 8 investigations (those that involve significant amounts of tax or complex technical arguments).
By contrast, however, new Code of Practice 9 (COP9) investigations (i.e. those where there is a suspicion of serious tax fraud) will not start yet. COP9 enquiries commenced before the pandemic struck were never paused in the same way that other enquiries were, although HMRC has been very reasonable about providing additional time to submit reports in view of the difficulties posed by the lockdown. Taxpayers previously under enquiry and who took advantage of HMRC’s offer to pause, should now prepare to resume their dialogue.Fiona Fernie, Blick Rothenberg
How will you know if you are subject to a HMRC investigation?
HMRC will notify a taxpayer in writing when it commences to examine their tax affairs. Typically, if HMRC starts a formal civil investigation, a letter will be sent requesting more information. For example, a taxpayer may receive a request for information on a property transaction or further information about a tax return from a local compliance audit.
However, if HMRC suspects criminal VAT fraud or high amounts of tax evaded then it may commence criminal investigations. Typically, unlike for a civil investigation, HMRC are unlikely to notify you at the start of the process but instead you will either be informed once you receive a letter requesting attendance to a voluntary interview under caution or when you are arrested.
It is crucial that, once under review, specialist Tax Investigation Lawyers are instructed. We regularly liaise with HMRC at formal meetings, agree what the scope of the disclosure should be and prepare the report on your behalf and reach a civil settlement with HMRC. We have wide-ranging experience in assisting those facing a COP 9 investigation whilst helping to navigate the rigid time-limits and strict rules.
How long will a tax investigation last?
It depends on the scope and nature of the HMRC investigation. The opening letter issued by the HMRC is usually a good guide on the potential length of any investigation. Some tax investigations finish after one letter; other investigations can take months with HMRC consistently requesting more information; and some investigations can be extending to longer than a year if involving complex tax structures or large businesses.
It is important to engage professional advice early on to minimise the length of any investigation as we identify any problems quickly and efficiently to get to the heart of the matter.
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