The thought of a visit from the Inspector of Taxes fills many businesses with a sense of dread. There is always the fear that something will be found that will result in additional tax being due, even in the best run organisations with all the right internal controls in place. And the cost to a business is not limited to the potential additional tax, interest and penalties. The disruption caused by such a visit can be equally costly.
The only way these costs can be mitigated is by controlling these visits as efficiently as possible. The good news is that the majority of Inland Revenue enquiries begin with an approach to the business’s accountant, so enabling the necessary controls to be put in place.
There is always the threat of the HMRC carrying out an unannounced inspection, however, and there are two types of unannounced visits to be aware of. The first is when a routine inspection is planned but HMRC has forgotten to confirm the visit. In these circumstances the business being inspected can validly ask for the inspector to return at another time. The second type of unannounced inspection is when HMRC deliberately does not warn a business of a visit and just turns up on the day.
In these situations, entry to the premises can only be obtained by the inspector on production of a formal notice signed either by a Tribunal or an authorised HMRC officer. This notice is actually only a request to enter the premises and does not give any automatic rights to do so. In these circumstances it is important that the business seeks advice from their accountant before allowing entry.
Investigation Insurance providers have announced that there has been an 84% increase in HMRC investigations over the past year, resulting in over £12 billion additional tax being raised as a result. As the UK government seems keen to maximise their tax revenue at this time, it would seem that exposure to an enquiry is now at an all time high.
As a result of this increased risk, insurance providers have experienced a significant increase in the take up of their Professional Fee Protection insurance which provides cover for unnecessary costs during an investigation. Should you be interested in providing this cover for your business too, please contact your accountant to discuss this type of insurance policy further. Even if your business records are in excellent order, your accounts and returns are accurate and all your submissions have been made in good time, this provides no guarantee that HMRC will not carry out an inspection.