According to a recent report in the Daily Telegraph, HMRC launched 237,215 individual tax enquiries last year compared with 119,000 in 2011/12. In that same time enquiries into the self-employed quadrupled, whilst annual prosecutions rose sevenfold in three years.
Some tax experts claim that HMRC have been going after professionals such as doctors, lawyers and teachers, as they are viewed as soft targets. Apparently, these people are more inclined to settle without too much of a fuss because of the anxiety caused by receiving a warning letter from the Revenue. It is difficult to imagine a lawyer not disputing any claim made by HMRC!
A Tory MP on the Commons Treasury select committee was reported as saying that HMRC had been “given a mandate to aggressively go about trying to collect tax” and that the department were “nit-picking”.
Over the last 3 years HMRC has added an extra 200 investigators to its ranks and are now more than 1,600 strong in number.
A spokesman for HMRC told the Telegraph that the increase in investigations was a result of the department undertaking more compliance enquiries and said, “Inquiries are only opened where we believe there may be a problem causing the wrong tax to be paid.”
This increase in compliance activity is certainly playing out in the field of IR35 where there appears to be a marked rise in investigations, reaching outside of the public sector into areas such as financial institutions and large national and multi-national companies. Furthermore, a good number of enquiries that I have seen in the last few months involve contractors who do not have tax enquiry insurance. Now would be a good time to invest in such.