HMRC is currently sending letters to individuals to check their tax affairs. It’s all part of an effort to make sure that both individuals and partnerships are correctly recording their accounts. Last year, HMRC sent out more than 8 million letters and made over 6 million phone calls in an effort to give people a chance to put their tax affairs in order, and now the government agency is set to do the same again. |
The reason for this action has to do with the growing number of people that are being subjected to income tax investigations. HMRC has a potential public relations problem on its hands, so it intends to reach out to people who may not have paid their tax in full before pursuing them further or prosecuting.
For individuals and partnerships, it is a potentially dangerous time. The consequences of a full income tax investigation can be damaging and can include substantial fines and interest payments on any tax overdue from previous years.
Currently, there are two ways in which HMRC launches an investigation. The first is on a random basis. Each year, the tax authorities randomly select people on their books to be the subject of a tax investigation. The number of individuals involved in these investigations is so low as to be negligible, so for most sole traders and partnerships, these aren’t a significant threat.
The second reason for an investigation is if HMRC detects some kind of anomaly on a trader's tax return. If the agency suspects that the amount of tax that you’ve paid is wrong according to a tax return you’ve made in the last twelve months, then it will issue you with a notice telling you that it has officially started conducting a tax investigation.
Professional Advice From Gilbert Tax
Fortunately for people who find themselves being investigated by HMRC, help is at hand. Tax advisers at Gilbert Tax are offering advice on the matter through their website and in person.
The first thing that they recommend people do is to satisfy themselves that HMRC is indeed entitled to ask for what they have requested as part of their investigation. As the law stands, say Gilbert Tax, as long as the trader has taken reasonable care, HMRC has a 12-month deadline to enquire about a tax return after which individuals and partnerships are no longer obligated to provide the agency with their returns.
“HMRC are entitled to look at the records supporting the tax returns and nothing else” insists the firm. “However,” they point out, “their information requests often go way beyond what they are legally entitled to.” For instance, HMRC will often ask for "private bank statements and credit cards”, where they are not entitled to see them.
The company also recommends that individuals disclose any issues that they have found in their tax returns as soon as possible. Early disclosure, they say, helps to reduce any penalties that might arise as a result of the late payment of tax.
Gilbert Tax say that people often don’t know where to turn when HMRC finds problems with their tax return or when they have a dispute with the tax office. Both HMRC and individuals can make mistakes, which is why the firm offers a confidential advice line and further information on its website.
Company: Gilbert Tax
Address: Westbourne House, 99 Lidgett Lane, Garforth, Leeds, LS25 1LJ, UK
Telephone: 0113 287 2299
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