Businesses face further scrutiny as HMRC clamps down on tax avoidance
As the government steps up its pursuit of tax evaders and those that facilitate tax avoidance schemes, businesses must ensure advisers are working within legal and ethical guidelines.
Alongside Rachel Reeves’ recent spring statement, the government announced new consultations in relation to tax avoidance that seek to clamp down on tax avoidance and those who play a role in it. Specifically, the government will give HMRC additional powers to ‘effectively disrupt the business model’s promoters rely on’.
Amongst the additional powers are plans to raise the financial penalty for dishonest conduct from the current maximum of £50,000 to fees potentially reaching millions of pounds. HMRC will also be given new powers to investigate and request information from tax advisers and under the plans, any individual or business subject to an HMRC sanction could have their details published.
According to Hamraj Kang at KANGS Solicitors, the proposals are yet another signal of intent from the government to tackle tax avoidance. Hamraj Kang explained: “Taxpayers, both corporate and individual, should expect to be under more scrutiny than ever. It’s vitally important that they are prepared should they face a HMRC investigation or enquiry and not just about their own affairs. It’s wise to review relationships with existing advisers to ensure that proper due diligence is undertaken before acting on any advice from a tax adviser or tax scheme promoter.”
The news comes shortly after new data was published that found that prosecutions of the enablers of tax evasion has dropped by 75% in the past five years. The government aims to narrow the tax gap which it says stands at more than £40bn.
“An impending HMRC investigation can be a daunting prospect for any organisation or individual and failure to comply can potentially lead to heavy fines and penalties. It’s integral that taxpayers are well prepared and tackle any enquiries in a measured and methodical manner. While serious, an investigation or enquiry by HMRC doesn’t always mean there has been any wrongdoing. The tax authority can be prone to error just like any organisation can,” Hamraj Kang continued.
“The government’s new proposals are not the first step in its pursuit to close the tax gap. They follow on from announcements last year that HMRC will recruit 5,000 more tax officials. The net result for businesses is that they may find themselves under the microscope and should make sure they have their affairs in order and be prepared to adequately deal with an investigation by HMRC.”
“It goes without saying that businesses ought to review their tax practices and relationships with advisers regularly to support compliance efforts and ensure ethical behaviour. It’s more important than ever that companies maintain a clear and up to date audit trail of all activity and conduct their own due diligence to ensure advisers are acting within legal and ethical guidelines.”
Hamraj Kang concluded: “Even if it’s just a one-off consultation, taxpayers can seek expert legal expertise to help tackle any enquiry from HMRC with confidence. At any stage of the process, businesses and individuals must ensure they’re fully informed and well placed to handle all aspects of a tax enquiry or investigation.”