By Dominic Bourquin, Tax Consultancy and Corporate Finance Partner
The Coronavirus Job Retention Scheme AKA furlough was a lifeline to many UK businesses, and some of those still going today have the scheme to thank for its critical support. However, two years on, business owners are being faced with the consequences as data shows it cost the government an estimated £70 billion between April 2020 and November 2021.
Add on the current rising interest rates, inflation, the energy support package, and the now very present recession – which the Bank of England predicts will be a “very challenging” two years – and the UK economy is neck-deep in debt. £2 trillion to be precise. As such, HMRC has ramped up its tax investigation activities, employing a 4,100-person strong taskforce in a mission to recoup some of these costs. Since last year, it has raised £34.1 billion from tax investigations with no sign of slowing down.
Nor has this been helped by those seeking to take advantage of the situation, such as the fraudster in India who set up four faux London-based companies in 2020 and claimed furlough payments of £27 million. HMRC estimates up to 10 per cent of furlough claims were fraudulent.
But it isn’t just fraudsters HMRC is after. Any taxpayer who submits a tax return can be selected at random. Investigations include extensive searches and examinations into any business documents, tax returns, payments, and compliance histories, and unannounced inspections of your information that can date back as far as 20 years.
Unfortunately for those who are targeted, investigations can be lengthy – lasting months, even years – disruptive, intrusive, stressful … and extremely expensive. Average accountancy fees to help you through the process weigh in at £3,200. That’s a hefty sum when 30 per cent of investigations result in no additional tax being owed, so you’re needlessly paying out fees when you’re entirely innocent. If there is tax outstanding, it usually (70 per cent of the time) amounts to less than the fees themselves.
For start-ups and SMEs across the country, now can feel like an unnerving time. With overheads and taxes rising and seemingly never-ending inflation hikes putting further pressure on consumers, the last thing entrepreneurs and business owners need is a needless tax investigation with the potential to hit your business in the way the pandemic would have, if it were not for the furlough scheme (the irony).
So, can you really afford to have your tax affairs investigated?
Business owners need to be thinking ahead and prepare for the worst. Not in a glass-half-empty kind of way, but if you fail to plan, you plan to fail.
Finding an accountancy and business advisory firm like Monahans, south-west’s leading accountancy and business advisory firm, which can mitigate the risk of being targeted, get your affairs in order, and defend you and your business in the case you’re selected for investigation, is being business savvy.
Tax investigation services are designed to defend businesses while covering any costs they may be subjected to and give business founders some peace of mind so they can carry on focussing on the important things.