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Tax News 2009

Warning signs that could trigger a tax investigation

Clients need to be aware of the warning signs that could trigger a tax investigation.

Responsibility for deciding which taxpayers should have their tax returns scrutinised rests with HM Revenue & Customs’ Risk Intelligence Assessment Teams (RIATs).

As might be expected, the RIATs are secretive about the way they operate and are even protected from providing details by the Freedom of Information Act.

Their reasons for initiating a tax enquiry are much the same as they were for local tax inspectors pre-RIATs.

They also draw on UK-wide information, which they use to compare factors within a target business, such as income, profit ratios and expenses, with those of similar businesses”.

While the RIATs remain tight-lipped about possible triggers, tax issues likely to arouse their interest include:

• more than one recent set of overdue accounts or tax returns
• significantly fluctuating income or expenses
• expenses that are obviously incorrect
• no adjustments for the private use element of expenses
• low income compared with likely outgoings.

Some simple steps can help to reduce your risk of attracting the RIATs’ attention. Staying up to date with your tax returns is a wise move, even if we have to submit a form using estimated figures. If necessary, we can tick the “estimated figures” box on the declaration page and submit the correct figure shortly afterwards..

It is also worth taking time to look carefully through your accounts when we present them to you, querying any figures that look out of place. If the figure is correct, it might be appropriate to include an explanatory note with your tax return.

This article has been provided by UK200Group.