Introduction
Tax inspections are stressful, time consuming and potentially very costly if caught by IR35.
This article discusses the reasons why you might be selected for investigation,
and the practices you can adopt to ensure you are not selected.
Who gets investigated?
Why there are a small number of random cases, being chosen for inspection is
rarely “the luck of the draw”.
The vast majority of business and individuals are selected personally by
experienced Revenue Inspectors.
So why would an officer target your business?
The vast majority of business and individuals are selected personally by experienced Revenue Inspectors.
Business Reviews
Some reasons for selection:
-
List of similar businesses where errors have been found in the past (for
example computer and financial industries);
-
Late submission of P35 (Employers Annual Declaration) or errors on other
completed forms;
-
Review of the business file at the Revenue;
-
Anonymous letter that tax affairs are not correct (often from a competitor);
and
-
Random selection of businesses in the tax office area. Some businesses are
surprised at how often they are visited or appear to be targeted.
Reviews often lead to Self Assessment Enquiries (for proprietors/ partners) or
Corporation Tax Enquiries.
Self Assessment Reviews
Some reasons for selection:
-
Round sums of income (£30,000 or £48,000 can indicate the individual receives
the same monthly income/fees from the same Client);
-
A business review has revealed payments to a contractor who is not shown in the
Revenue database;
-
The Revenue keep databases of information, for example details of all income
from banks/building societies of bank interest paid. This can easily show if
someone has more than one bank account and if they have only declared interest
from one account;
The databases can be useful to compare different contractors in the same type
of work (for example which contractors claim a high number of expenses).
Protecting yourself - next steps
The Revenue inspects all business records on average every 5 to 6 years and obtains the best results when contractors are not prepared.
The Revenue inspects all business records, on average, every 5 – 6 years and
obtains the best results when contractors are not prepared.
If you haven’t had a Revenue inspection in the last few years, then you may be
due a visit in the next few months.
Seek professional advice
Ensure you seek professional advice as soon as you are notified by the Revenue
that they wish to inspect your business.
The Revenue is notoriously ruthless in their inspections and attempt to achieve
the best results they can. Using a professional advisor can save you thousands
of pounds.
Updated Wednesday, October 18, 2006, [Originally published Wednesday, January 26, 2005]
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