The UK general election is scheduled for 4th July, and post-election, various political parties are expected to intensify tax investigations.
Both the Labour Party and the Tory Party have proposed plans to increase tax investigations.
Additionally, there will be increased funding for HMRC to recruit tax investigators and expand the scope of investigations.
Which Businesses or Individuals Are Likely to Be Investigated?
Self-Employed
Currently, a significant proportion of tax investigations in the UK target the self-employed.
Unlike other businesses, the self-employed must report their annual financial status through self-assessment tax returns.
Typically, they do not have a dedicated accounting team, meaning discrepancies may arise between their tax returns and HMRC’s records.
Furthermore, late payments or random checks can increase the likelihood of the self-employed being investigated.
High Cash Flow Businesses
High cash flow businesses, such as restaurants, pubs, and retail stores, frequently handle large amounts of cash transactions.
Cash transactions are often difficult to track and record, which can lead to underreporting income.
HMRC has historically preferred to initiate random tax investigations in high cash flow industries.
If you operate one of these types of businesses, ensure that you retain all financial records for at least six years.
Multinational Companies
Multinational companies, often with operations in other countries, have become a primary focus for HMRC in recent years.
HMRC currently has a substantial team dedicated to international tax issues for multinational corporations, despite longer investigation periods.
Due to their presence in multiple jurisdictions, these companies can allocate financial expenditures across different countries, reducing taxable income in the UK.
As a result, multinational companies are more likely to trigger UK tax investigations.
Businesses with Frequent Changes in Registration Information
Businesses that frequently change financial personnel or registration information may be seen as attempting to evade tax responsibilities.
Such changes can lead to instability in financial records and reporting, thereby increasing the risk of being investigated.
HMRC might view these changes as efforts to conceal financial and tax issues, prompting a tax investigation.
