Who will HMRC target? and why?

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Well, there are many reasons for them scrutinising your tax returns and here are some in a nutshell!

Informants

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

Home-made accounts

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.

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