If you were among those hit by the new 50p top tax rate back in April, then you could now be more likely to receive a rather unwelcome knock on the door from the taxman.

Proposal

Under plans unveiled by the Liberal Democrats at their recent conference in Liverpool, half of the UK’s 300,000 higher earners affected by the top tax rate face having their tax affairs checked over by HM Revenue and Customs (HMRC).

This means that the number of tax investigations will rise from the current figure of 5,000 to 150,000 a year – an increase of 3,000%.

Why?

The £900 million drive is designed to crack down on tax avoidance, the legal practice of using existing provisions within the current tax regime to minimise your tax liabilities. This should not be confused with tax evasion, where tax liabilities are avoided by illegal means, amounting to tax fraud.

Those who ‘hide’ money in offshore accounts will also come under scrutiny as part of the increased investigations.

As a result of the scheme, the number of criminal prosecutions relating to tax matters is expected to increase five-fold, while the Treasury has announced that it expects the initiative to bring in £7 billion a year by 2015.

While tax avoidance is certainly not illegal, the announcement highlights the importance of seeking professional advice on all tax matters to ensure you do not fall foul of any investigation.

Impact on small business

Even if you have nothing to hide, tax investigations can be both costly and time-consuming, particularly for smaller businesses which have neither the time nor the money to spare.

Need support?

Friendly, approachable, reliable professionals

At George Hay, we can advise clients on all aspects of taxation and can help you ensure that all your tax affairs are in order. We can help you ensure you do not pay too much or too little tax and, should you find yourself the subject of an investigation, can offer as much assistance as you need.

We are also able to offer tax investigation protection. As with any insurance, everyone hopes they will never need to use it, but taking out cover now could save you thousands of pounds in investigation fees should the taxman come calling – money that could be put to better use in your business.

For more information on any area of taxation, including tax investigations, or to find out more about tax investigation protection, please contact us.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Leave a Reply

CommentLuv badge