In March 2021, government plans for a Taxpayers Protection Taskforce were announced. Over 1,250 HMRC Officials will oversee and be responsible for investigating and prosecuting individuals who may have misused or abused the government assistance schemes introduced during the pandemic. Such schemes include the Job Retention Scheme (the Furlough Scheme), the Self Employment Income Support Scheme and the Bounce Back Loan Scheme (withdrawn on 1st of April 2021).
How will HMRC’s Taxpayer Protection Taskforce operate?
The new Taskforce will be actively working alongside other measures to tackle fraudulent activity, including a campaign to highlight enforcement methods in order to deter fraudulent and criminal behaviour. In addition, examining claims from whistleblowers officials would be prompted to sift through PAYE records, tax returns and other relevant documents in order to establish unlawful means of generated income.
To capture taxpayers who have fraudulently utilised the Bounce Back Loan Scheme, the Government will build on guidance issued to lenders leading to the scheme being withdrawn from 1st April 2021. This guidance has already stopped more than 42,000 fraudulent loans from being granted.
How serious is Covid-19 related fraud?
Throughout the pandemic, the Government have tried to help individuals and businesses recover from hardships and will now take fraudulent claims very seriously. HMRC are able to issue assessments and penalties and take criminal action.
Cases caught have included an arrest for furlough fraud in the amount of £70,000 and it is estimated that hMRC have collected over £2 billion to date from fraudulent taxpayers. This has been greatly publicised as a result of their actions and heavy penalties have been produced.
There will be more oversight by the taskforce over professions such as tax advisers, architects, surveyors and legal professionals, and others who deal with client monies who can intentionally or inadvertently get entangled in fraud.
What is a compliance check or tax investigation?
A compliance check is an enquiry conducted by HMRC into the tax affairs and tax payment history of any UK individual, employee, director or company. A HMRC tax investigation can come in many forms and covers a range of taxes covered under HMRC jurisdiction such as: VAT; income tax; corporation tax and capital gains tax and in this case with tax support payments granted to businesses as a result of the coronavirus pandemic e.g. the Coronavirus Job Retention Scheme (“CJRS”) also referred to as furlough scheme.
How HMRC does carry out a compliance check?
The type and severity of the investigation is completely dependent on the facts of any individual case. Typically, an investigation generally commences when HMRC notice irregularities in information supplied via a Self Assessment Tax return. A taxpayer will receive a letter from HMRC informing them that an investigation has been opened into their tax affairs and may include a request for information.
Businesses will have 60 days to respond to HMRC’s letter opening a compliance check and provide HMRC with any requested information. Failure to provide the requested information or correct information may result in HMRC issuing a penalty notice.
It is strongly recommended that you consult a tax lawyer as soon as possible to receive detailed advice on how to take control of the situation and negotiate with HMRC.
What is voluntary disclosure?
HMRC campaigns encourage taxpayers that have undeclared income to voluntarily disclose their undeclared earnings or additional income. In return, HMRC will usually be more lenient when it comes to potential penalties on those who come forward and voluntarily disclose their financial information.
It is important to cooperate with HMRC as much as possible during a compliance check and seek legal advice at the outset to understand your position as it may be advisable or necessary to give a voluntary disclosure to HMRC.
My adviser negligently handled my COVID-19 tax claim
Tax advisers and accountants are often instructed to manage a taxpayer’s tax affairs and prepare and submit returns on their behalf, they may have also been instructed to prepare any furlough claims or applications for bounce back loans. The burden of proof remains on HMRC to show deliberate behaviour but where actions have been delegated to a tax adviser or accountant, to show their conduct was also deliberate.
Whilst there may not be a third party defence in an appeal against a tax assessment or penalty, if your tax agent, accountant or tax adviser has failed to carry out your instructions i.e. file a tax return, prepared incorrect calculations, you may have a valid complaint or potential negligence claim against the individual or company.
Our professional negligence team can assist and advise you on the suitable course of action.
Expert London HMRC Tax Investigations
If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigation process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, Code of Practice 8 (COP 8) investigations, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.
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