Figures obtained by the Daily Telegraph show that HMRC made enquiries about the tax affairs of 237,215 people last year, compared with about 119,000 in 2011-12, raising concerns that people who have made innocent mistakes are being targeted by the government.
The number of self-employed people investigated has quadrupled in that time while annual prosecutions have risen sevenfold in three years. An HMRC spokesman said the increase in cases was because it was holding more compliance enquiries, adding that: “Enquiries are only opened where we believe there may be a problem causing the wrong tax to be paid.”
We say: HMRC is perfectly entitled to raise enquiries: it’s part and parcel of the self-assessment regime. And the great majority of enquiries are conducted fairly and honestly by HMRC officers. The unfortunate thing is that most people are ill-equipped to deal with even the most straightforward of HMRC enquiries themselves, and many of those few who would, in truth, be capable of doing so are too intimidated by the (usually) false prospect of being terrorised by HMRC Inspectors to have the courage to do it. This means that for most people who are subjected to enquiry, professional representation is a practical necessity. And, sadly, that costs money – money which has to be found even if (as is not infrequently the case) a tax enquiry concludes that there is no extra tax to pay.
Which brings us on to the need for insurance against the professional fees of a tax enquiry. It’s widely available. We offer it to our clients and, as it happens, we are sending out renewal reminders right at this minute. We very strongly recommend it for the peace of mind it offers. And if you want to know more about the world of tax investigations, take a look at our website.