HMRC collected a total of £438m from investigations into self-assessed taxpayers over the last year, highlighting the need for close attention to detail and careful organisation when filing returns. The healthy take from investigations means the Revenue is likely to continue to conduct enquires of this kind.

Particular focus, currently topical in the general media, is the aspect of employee status and the ‘gig economy’. HMRC has already created a new unit – called the employment status and intermediaries team – in order to tackle misuse by companies of agency workers to avoid tax and other employment obligations. Therefore, it likely that HMRC will be keeping a close eye on the sector as a whole.

However, HMRC aims to identify any inaccuracies in tax returns, and is cracking down on taxpayers from all walks of life- not just higher net worth individuals.

Taxpayers in occupations who earn their income from multiple sources – such as landlords and freelance workers – are particularly at risk of becoming targets of a tax investigation, as their returns will typically be more complex.

Investigations are easily triggered by small errors due to carelessness, or a simple misunderstanding of the process. If discrepancies are found in a return, they could lead to a lengthy, expensive and disruptive tax investigation process for taxpayers.

As you may be aware, HMRC’s desire to drive up their tax take has triggered investment in technology in order to fully digitise systems, which enables them to more quickly identify potential targets for tax investigations.

HMRC’s initiative ‘Making Tax Digital’ has led to some concerns that the move online could drive more mistakes. As people look to take control of filing their own accounts due to the convenience and ease of filing online, rather than filing with an accountant, errors are more likely to be made, which could lead to more investigations by the Revenue.

Tax investigations are an unwelcome and unnecessary burden. Should such a situation occur, you may benefit from tax investigation fee protection product which can help cover our accountancy fees to defend you.

To find out more contact Russell Eisen on 0207 600 5667.

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