How much of a tax investigation could you take? With the ensuing costs, intrusion, time and stress involved, there is no underestimating the impact this can have; which makes this week’s news very unwelcome. It’s just come to light through a Freedom of Information request, that HMRC is taking 20% longer with tax investigations. According to tax investigation insurer PFP who put in the request, the average length of time taken to investigate ordinary taxpayers was 2.5 months in 2012-2013 and went up to three months in 2013-2014.
“It’s not likely to be me (the lottery never is!)”
Somewhere there’s a bit of humour involving Lady Luck & Sod’s Law but as this is about tax, we’ll skip past that for now. The following quote is from PFP’s Managing Director Kevin Igoe and helps explain the lack of humour and sense of gloom on this:
“..the average length of an enquiry currently stands at three months, it is not unusual for them to take much longer, and in some cases can stretch on for years.”
A full investigation that gets forensic can and likely will include looking into hospital and DVLA records, your social media activity, council information, online purchases and all the other corners of your life that seem innocent enough, till HMRC puts them under the spotlight. As an individual, the person being investigated will have to find the money for advisory fees to lawyers and accountants and the time required to participate.
“But I didn’t do anything wrong!”
A further cause for concern comes with mention of HMRC’s Connect database that launched in the summer of 2010 and by 2011 had delivered £1.4bn of additional revenues, according to the National Audit Office. Using a mathematical technique known as ‘social network analysis’ that scours online information that may otherwise appear irrelevant and unrelated, in order detect networks, links and relationships. However… industry media warns that it can throw up false leads and lead to innocent people being falsely accused of cheating.
“Innocent individuals are often drawn into tax enquiries, which are both distressing and costly, so a 20% jump in the average time taken means a rise in levels of stress and cost to the potentially innocent individual.” adds Kevin Igoe.
You can’t do anything to guarantee you’ll avoid investigation but you can reduce your risks and cover your bases; you need an Accountant you can trust to be working on your side (not just for HMRC) and it is worth seriously considering taking out tax investigation insurance; so that if the worst happens, those additional costs won’t be part of the impact.