What prompts HMRC to investigate a business? HMRC can open a tax investigation into any business, at any time. You can have completed every form and ticked every box, and they can still decide to scrutinise your Tax Return, VAT Return or any submission made to HMRC, and afterwards send you a tax demand that you were not prepared for and may not have the funds to meet. What should you do if HMRC announce they will be inspecting your organisation? Your first call should be to a professional tax adviser who specialises in the area of tax being investigated and also has experience in dealing with HMRC investigations. Several of our tax team have worked for HMRC in the past and have many years of experience in dealing with their demands. Tax investigations can be difficult and stressful, and a good tax adviser will be able to offer support and advice and will work with you to help you manage what can be a challenging situation for all concerned.
Points to bear in mind:
• Our tax team have professional experience and knowledge of HMRC’s practices and methods and can understand some of the most complex aspects of their regulations
• A tax investigation is often a lengthy process – the case study above took two years to complete
• To mitigate the risk of any opaque data or non- compliant methods being uncovered by HMRC we strongly recommend that businesses have their tax affairs regularly reviewed by independent and professional tax advisers Take pre-emptive action If the thought of having a tax investigation opened into your business is causing you any concern, you may want to consider protecting your business by taking out tax investigation insurance. Tax investigations can be lengthy, time-consuming, and expensive, and they can happen to anyone - even if you’ve done everything by the book. With tax investigation insurance, you’ll have peace of mind knowing that you’re covered in the event of an HMRC investigation.
A recent case study:
• The client – a large educational not-for-profit organisation
• The background – in March 2020 (just as Covid was taking hold!) HMRC sent a letter to the client announcing they would be carrying out a VAT inspection • The call – the client immediately contacted Scrutton Bland’s tax team to ask for advice on what to do next • Our response – our tax team stepped in to deal with the situation: examining the client’s VAT records, and gathering information, checking that everything was in order, and predicting some of the things that HMRC would want to know • Next steps – we then contacted HMRC to ask questions about their investigation, negotiate with them on the information that was needed and timescales to provide this data • The tax demand – HMRC carried out their inspection, then made a tax demand for the high tens of thousands of pounds • Our strategy – we didn’t accept the HMRC verdict and challenged their findings, providing evidence to rigorously refute their claims • The result – the client went from having a demand for tens of thousands of pounds, to receiving a tax rebate of £7k.
Tax investigation insurance covers the cost of professional fees associated with an HMRC investigation, including:
• Our fees for handling the investigation on your behalf
• Any fees for outside experts or legal counsel we may need to hire
• Expenses incurred for attending meetings and preparing documents
By taking out tax investigation insurance, you’ll be protected against unexpected expenses and can be rest assured that you’ll receive expert guidance and support throughout the entire process. Please note that the Tax Investigation Insurance outlined in this article is only available to clients of Scrutton Bland LLP. However, the Tax team are able to act on your behalf to deal with HMRC tax investigations should you receive a letter and want to engage specialists to act on your behalf. We have been advising clients with tax issues relating to agriculture, farming and land management for many years, and our knowledge and experience helps us to understand the kind of tax issues they face. If you have a query or would like to talk about Tax Investigation Insurance further, please get in touch by emailing hello@scruttonbland.co.uk or by giving us a call on 0330 058 6559.
AGRICULTURE AND FARMING | SCRUTTON BLAND | 1 7
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