HMRC Presses Pause Button on Tax Investigations
HMRC Presses Pause Button on Tax Investigations
It has emerged that some businesses and individuals have been given a respite from HM Customs & Excise’s on-going investigations into their tax affairs.
The HMRC compliance team undertakes investigations into individual and corporate taxpayers who it thinks may have under-reported its tax liabilities. Reports have emerged from many accountants that clients have received letters from HMRC relaxing or removing deadlines it has imposed for responses to tax queries.
It’s understood that HMRC has told them it will not seek, or insist on, information or documents during the lockdown. In some cases, HMRC has reportedly indicated it will temporarily suspend inquiries but there is no suggestion that the taxman will write off any tax debts – this really is a ‘pause’.
Furthermore, HMRC has stated it will proceed with investigations if people are willing to cooperate. Those that have a looming deadline have not been paused.
This decision to press the pause button should be taken not so much as leniency or goodwill on HMRC’s part, but rather a necessary diversion of manpower from its tax compliance team to the task of administering the government’s Coronavirus Job Retention Scheme (CJRS). It is, after all, HMRC which has been given the responsibility of setting up and running the CJRS.
But what does this mean for those subject to HMRC investigations when normality returns? Official comments made by government certainly suggest the reprieve is only for the short term. A spokesperson for government has said: “It is right that HMRC does everything possible to protect individuals, businesses and that the economy during this extremely difficult time. This includes prioritising work to support businesses and individuals.
“HMRC will always take tough action against fraudsters who attempt to deprive the UK of the public funds the government needs to support the nation at this difficult time.”
So when it is ‘business as usual’, investigations will most probably be kick started and businesses and individuals found to have underpaid tax could face an additional tax bill – just at a time when they could be in particular financial difficulties.
Could HMRC decide to drop some of its investigations? A positive spin on this pause could be that the government is loathe to continue exerting financial pressure on business through its compliance team on the one hand, and helping businesses survive the financial fall-out from the pandemic on the other hand. The cynic would take the view that the last thing the government would contemplate is to forego the chance to recoup taxes due when the government debt has rocketed.
It will be interesting to observe what further developments will emerge as the weeks and months go on.
How should firms react?
Ironically, for some firms and individuals under investigation, the pause combined with potential extra time during the lockdown grants them some much needed breathing space; and time to look at their records and collect the information required to satisfy any existing or expected requests for information from HMRC.
The temptation to leave the matter to one side for now may be strong, but businesses should remember that interest accrues on unpaid tax; penalties could be imposed; and anyway - if you have strong evidence which you consider can satisfy a compliance investigation – would it be better to resolve it quickly now and move on?
It is also a salutary reminder for businesses to keep on top of their record-keeping. It would mean that in future, they are better able to satisfy the HMRC compliance team if they were to become the subject of a tax compliance audit.
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