HMRC’s investigation, post-COVID 19
HMRC’s investigation 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, and 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.
What does the HMRC’s Investigation System do?
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 an unpaid leave of absence by their companies. The state has also helped 2.5 million self-employed people, and the calculated revenue shortfall may 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 from escaping tax payments to reduce this significant shortfall in Government revenue.
HRMC has already got a very advanced “Connect” software which can help locate non-tax conforming companies 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, Revenue will overlook the balance. But this set 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 spreading 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 a significant rise in revenues, as digital transactions cannot be hidden.
The tax earnings from a proper inspection are significant as several heads of tax are 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 jewelry, as well as Registry information to locate buying of land and property. It is very simple for HRMC to investigate if there is a mismatch between one’s living standards and the earnings or declared gains. It rests on the individual to explain the financial transactions.
To conclude, the forthcoming months are anticipated to see 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 inquiry.
Would you like to know how we can help you with your regulatory reporting needs? Write to one of our experts at enquiry@datatracks.co.uk
Know about how far the HRMC’s Investigation can go.