Tax disputes
HM Revenue and Customs (HMRC) is increasing the number and scope of tax investigations into both individuals and businesses, covering all aspects of potential underpayments of tax, including offshore investments, personal and corporate Self-Assessment Tax Returns, PAYE and NIC compliance and VAT.
This increased enquiry focus was already evident prior to the COVID-19 pandemic. The pressure on government to raise funds to recover the significant sums deployed will only increase this.
In the past, an individual inspector reviewing tax returns – or through random selection – would trigger most enquiries. However, HMRC now has many tools to risk assess taxpayers, and random selections are rare. Data analytics processes, information provided by financial institutions and tip offs from third parties are increasingly used to flag returns that merit a second look. It is quite likely that if HMRC opens an enquiry, they believe an error may have been made.