HMRC has 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, especially for those workers reliant on the ‘gig economy’. The healthy take from investigations means HMRC is likely to continue to conduct enquires of this kind.
The growth of the UK’s ‘gig economy’ could mean that the numbers of these investigations increase in the future. The ‘gig economy’ involves companies such as Uber and Deliveroo who use a short-term or freelance contracts rather than having permanent employees. These types of contracts result in more ‘self-employed’ workers, who will take responsibility for their tax affairs.
Politicians have said they are likely to be concerned with underpayments in tax relating to the ‘gig economy’ and therefore HMRC may be extra vigilant in spotting errors in self-assessment returns.
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 is likely that HMRC will be keeping a close eye on the sector as a whole.
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. These issues are exacerbated by the difficulty that individuals often have in contacting HMRC in order to discuss their tax affairs.
Investigations are easily triggered by small errors due to carelessness, or a simple misunderstanding of the process.
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.
If discrepancies are found in a return, they could lead to a lengthy, expensive and disruptive tax investigation process for taxpayers.
HMRC’s initiative ‘Making Tax Digital’ has led to some concerns that the move online could drive more mistakes, which could lead to more investigations by the Revenue.
Taxpayers need to ensure that they are protecting themselves by seeking professional advice when necessary in order to fully understand how to properly file their tax returns.
HMRC can launch an investigation into anyone who submits a tax return and while many of these investigations are the result of targeted campaigns or perceived mistakes - HMRC are just as likely to investigate returns at random.
Tax investigations are an unwelcome and unnecessary burden. If you’ve fallen under the watchful eye of HMRC contact us now.
