HMRC’s investigation, post COVID 19
The HMRC in April had postponed a set of enquiries into actions involving tax evasion as it had to release funds for building reinforcement systems proclaimed by the Chancellor for tackling the Corona crisis. In some cases, tax checks were fully halted and HRMC got together a small team to help taxpayers who needed more time to settle Income Tax, VAT bills and manage the Furlough system.
In a recent announcement, HMRC has removed this moratorium and has renewed calling on taxpayers and their consultants wherever they feel tax responsibilities have been evaded.
The UK Government has spent around 17.5 billion pounds until now for the Corona crisis and approximately 8.7 million people have been asked to take unpaid leave of absence by their companies. The state has also helped 2.5 million self- employed people and the calculated shortfall in revenue may well exceed 300 billion pounds.
The issue in confronting the shortfall is that shortened turnover and gains linked to postponed tax payments have cut the tax payments to around half of the previous period. HRMC will probably expand and make extra efforts to stop companies escaping tax payments to reduce this great shortfall in Government revenue.
HRMC has already got a very advanced “Connect” software which can help in locating companies which are non-tax conforming, falling under the grey economy and not registered with HRMC.
The most usual way of escaping taxes is not fully disclosing all company profits or individual revenue under the mistaken impression that if some tax is paid then the balance will be overlooked by Revenue. But it is this set which can be more easily located due to the present crisis as cash payments have declined by more than 60 percent in the second half of March 2020.
The changeover to cashless transactions has been immense with the WHO backing the shift to digital payments to avoid spread of the virus through paper currency. This has put the radar on traders who have traditionally hidden gains through cash transactions and began to abruptly show significant rise in revenues, as digital transactions cannot be hidden.
The tax earnings from a proper inspection are significant as there are several heads of tax to be received like VAT, PAYE, Income and Corporation Tax, and Insurance. Revenue has access to a wide database of information including financing contracts while buying cars, electronics and jewellery as well as Registry information to locate buying of land, property. It is very simple for HRMC to begin investigation if there is a mismatch between one’s living standards and the earnings or declared gains and it rests on the individual to explain the financial transactions.
To conclude, the forthcoming months are anticipated to see a renewed scrutiny by HRMC employees and tax investigations are expected to start again, once their responsibilities related to the Corona crisis are over.
It is true that generally taxpaying citizens are straightforward and suffer unwittingly in this effort by HMRC. Hence, professional help is very much in demand if not indispensable for company founders who need not break their heads about the regulatory reporting requirements involved in justifying their clean conscience in case of an enquiry.
Would you like to know how we can help you with your regulatory reporting needs? Write to one of our experts at firstname.lastname@example.org