The taxman being firm but fair.......

Last week I talked about how the Revenue are preapred to help with any tax liability that a taxpayer may have trouble paying. But on the other side of the coin they can also investigate whoever they wish - usually when they have reason to believe that tax is being lost. In 2009 the Revenue undertook 250,000 investigations reclaiming £220 million pounds of unpaid tax!!!

The classic scenarios that could lead to investigation are:

• Cash businesses
• Failure to comply with tax law, e.g. late submission of Returns, late payment of taxes.
• Insufficient income to meet outgoings. 
• Third party information - yes someone else informing the Revenue
• Information from other tax gathering departments, e.g. the VAT office, PAYE Audit or Compliance visit.

You should be aware that the Inland Revenue passes information to the VAT office and thus you could also be involved in a VAT investigation as a direct result of any Inland Revenue enquiry.

In view of the Revenue’s powers and multiple sources of information at it’s disposal, dealing with an investigation can be a very time consuming and a costly affair.

So get your accountant to review your accounting records and take thier advice on what you can and cannot claim, also there are insurance policies that you can take out which mean your accountants fees will be covered if an investigation is done on your affairs.

The message is simple - keep your records properly, be compliant and pay the right amount of tax.