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Hard-nosed taxman will put businesses under the microscope A Midland tax expert says the taxman is set to be more hard-nosed in the coming year when it comes to the business of raising revenue.

Paul Edwards, director of taxation at accountants and business advisers Horwath Clark Whitehill, says that with soaring public expenditure and a sharp fall in collection, the Government will be under pressure to increase the tax take because of its huge debt mountain.

“Along with tax rate increases we can expect HM Revenue and Customs to enforce existing rules more rigorously and put businesses under the microscope,” he said.

“This will affect all taxpayers, particularly in the corporate sector where the Government will be less concerned about losing votes. The taxmen may even come knocking on your door.

“HMRC has recently started a programme of risk reviews for larger corporate businesses. Where a business can be classed as low risk there will be a light touch on compliance issues.

“Companies unwilling to co-operate in the risk review process or who do not rank as low risk can expect the taxman to pay close attention to their affairs.”

Mr Edwards said the risk review would cover all taxes, and involve HMRC specialists on corporation tax, accounting systems and regulations, VAT and employee taxes. HMRC was looking to improve its understanding of the business and its tax profile. “This will enable it to have an ongoing dialogue on tax-sensitive issues and to use this additional knowledge to collect more tax.

“Expect HMRC specialists to arrive on the doorstep wanting to talk about all aspects of your business, including its structure, the commercial environment, accounting and control systems. “The specialists will ask whether any tax planning has been undertaken – and if so they will want to see full details. “Where a company is selected for a risk review, it should consider its position carefully and prepare well in advance.”

It will need to answer questions of itself said Mr Edwards.

• Where are the sensitive areas?
• How do we respond if HMRC challenges these areas?
• Is there any point in co-operating with the review process?

He warned: “Whilst a group can refuse to participate in a risk review process, that may result in a very suspicious tax inspector who can then go down more formal enquiry avenues to get the details that he requires.”

For further information, please contact Miriam Sherwood on 01562 60101 or email miriam.sherwood@horwath.co.uk