It’s one of those phone calls you just don’t want to take. A notification from HMRC that they propose to visit your business to carry out an investigation.
The initial reaction may be panic – what have I done wrong? The answer, of course, may be nothing at all. But HMRC is increasingly sophisticated in its methods of gathering information, and regardless of the size of your business, they have a right to inspect your records.
Phil Berwick of specialist advisers Berwick Tax – and himself a former Inland Revenue tax inspector – recently briefed WBG members on what powers the taxman has to investigate your affairs. And, crucially, what powers they don’t have.
For instance, if tax inspectors turn up unannounced at your premises or home, unless they have a search warrant you can refuse entry.
But the most important action to take if HMRC do come knocking is to immediately seek the advice of a specialist.
Mr Berwick said that inspectors are likely to have a different opinion to you over “a mistake”. It is vital to have experienced support alongside you to respond in a way which makes it clear that “a mistake” is not a codeword for fiddling the books.
He added that HMRC penalties are extremely harsh, and inspectors use increasingly sophisticated methods of investigation to judge whether a taxpayer is being honest.
Not just through traditional methods, for instance by comparing your tax declaration with those in the same line of work, but also social media. They have been known to check online marketplaces such as Airbnb to find out if you are renting out your property; Google Earth to check the size of your home; and even Facebook – so don’t post a picture of your newly-acquired luxury yacht if you’ve “underestimated” your tax liability!
HMRC is also allowed to use paid informers, perhaps someone with a grudge. Or several people in fact – almost £500,000 was paid out to informers in one 12 month period.
Mr Berwick’s over-riding message is that if you are going to be the subject of an HMRC investigation, then seek help – and quickly.
To contact Phil Berwick email email@example.com, tel: 01795 385701 or 07956 492026.