Well, there are many reasons for them scrutinising your tax returns and here are some in a nutshell!
HMRC will never reveal their sources but it is largely accepted that a tip-off about possible tax evasion or errors made can be a major trigger for an investigation.
The most common informants are:
- Disgruntled employees or ex-partners who know of tax-evasion activities
- The existence of a cash-only policy at your business
- Living a lifestyle beyond your supposed means
Regular mistakes on returns
However, if you regularly make mistakes on your returns, submitting inaccurate figures or information year on year, HMRC will quickly grow suspicious. I would also say habitual late filers will flag up concern to HMRC too
Fluctuating profits and varying gross profit rates (or those which differ from what they expect your particular trade or sector to make) will be picked up by the HMRC computers as will year on year losses without a valid or evident explanation
The boss earns less than employees
Business owners earning less than employees is one such piece of suspicious activity.
Omission of income
At present omitted foreign bank interest is the flavour of the month as is any larger amounts of bank interest omitted
You do not have the representation of an accountant so this can lead to a suspicion that errors may have occurred and may warrant an enquiry.Share