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ICAEW: top tips for small businesses facing HMRC investigation

Following HMRC’s disclosure that one in 10 small businesses is under investigation in an attempt to get back the tax it failed to collect in 2015-2016, members may be interested to know that ICAEW has issued some advice to businesses that may be under scrutiny.


June 2018

With one in 10 small companies expected to be reviewed, there are practical steps that can be made.

Advice includes:

  • Keep invoices for sales and purchases; receipts for business expenses and bank records. Good records will also save you time and help you run your business more efficiently.
  • HMRC will carry out a compliance check on a self-assessment return, corporation tax return or VAT return if it thinks that something is incorrect. For example, when figures appear incorrect, a business makes a large claim for VAT or one with a large turnover declares a small amount of tax.
  • Most cases are settled by reaching an agreement with HMRC or businesses can ask for a review or appeal against most of HMRC’s decisions.
  • If HMRC decides to look at your business records it will usually contact businesses by telephone. The call should take between 10-15 minutes and HMRC will ask questions to make sure companies are meeting their legal responsibilities.
  • From the replies, HMRC will assess whether a business can submit an accurate tax return from its records; if further action will be taken; if a business needs some additional help and support and whether the case needs a face-to-face visit.
  • HMRC will contact you to agree a date and time if it thinks a business requires a face-to-face visit. The visit will take around two hours.
  • Depending on the outcome of a compliance check or business records check a business may have to pay additional tax as well as facing penalties.

Clive Lewis, ICAEW Head of Enterprise, said: “Legally, businesses have to keep records for income, VAT and employees. If HMRC announces that it is looking more closely at a company it can be both daunting and frightening for the business owner.”

Further information on what to do if a business is under investigation from HMRC and details of the ICAEW Business Advice Service can be found at www.businessadviceservice.com

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