HMRC investigations getting tougher

Those of us dealing with HMRC investigations are observing HMRC’s tougher stance when investigating Tax Returns of all types, whether it be picking on individuals who have forgotten to declare some interest or small businesses that are fighting for survival in a competitive market. HMRC are digging their heals in and not letting go, and more and more frequently aren’t willing to listen to simple common sense.

In one case HMRC were investigating a self-employed builder when they notified him that they intended to disallow the vast majority of expenditure he had claimed in his tax return, including amounts incurred for travel to and from sites of work.

HMRC proceeded to raise assessments going back 13 years with duties charged of £42,000 and a further £18,000 for deliberate misconduct penalties.

After a more detailed review of underlying records by his Tax Consultant it was proved that all expenditure had been incurred and yet HMRC still attempted to challenge significant sums for travel to and from building sites on the basis that this represented normal commute costs.

In face of HMRC’s intransigence, applications were made for an Alternative Dispute Resolution, and as a result of this HMRC were persuaded to open negotiations. Focus was put on HMRC to also prove their allegations of deliberate misconduct in conjunction with arguing that the client was operating as an itinerant trader.

Eventually, HMRC accepted the majority of travelling expenditure could be permitted and also that there had been no more than careless conduct. As a result, many of the years were deemed to be out of date. A negotiated resolution was reached which included suspension of any penalty; the outcome being that a settlement was reached for less than £5,000 against the original £60,000.

The costs involved in defending this case were over £4,400. HMRC will almost always presume the client doesn’t have access to the funds in order to challenge them but luckily he had taken up the offer of a Tax Investigation Service which paid for his defence costs. We offer a tax investigation service that can help you defend yourself against HMRC which is shortly approaching its annual renewal date and we will write to you soon giving you the opportunity to subscribe which we recommend that you do.