HRMC Tax Investigation Could Last Three Years
From the period between 2015 and 2016, the average time it takes to complete a tax investigation reaches 31 months while between 2016 and 2017, the time increased to 34 months. According to the tax authority, there is also an increase in the amount of tax that big companies are underpaying. The previous figure is £21.8 billion and it has risen to £24.8 billion. To ensure companies do not suffer, they avail insurance against tax investigation in order to cover losses and professional fees.
Pinsent Masons, a law firm, said that the average time it takes for HMRC investigations to be completed is longer because it takes three years for the settlement. The law firm added that the longer duration is not good for the business because of the trouble. During the entire investigation, a lot of time is invested by the senior management and the costs are also higher. In the end, businesses are subjected to longer uncertainties with regards to their financial status and legal standing.
According to the law firm, the increase in duration is mainly because of the determination of HMRC to complete all the cases they have on hand especially those with disputes from a technical standpoint. They continue investigation even if the tax authority has a weak case. Pinsent Masons added that HMRC is giving its attention on routine processes because there are less avoidance scheme for them to deal with.
HMRC has a model being followed for their Litigation and Settlement Strategy which is the one they use during tax disputes. This is the reason why HMRC cannot settle for lesser the amount that was originally claimed.
Pinsent Masons’ partner, Ian Hyde, said that HMRC and specifically individual officers do not want to be entered in an issue where they are suspected to be dealing with big companies. This is the reason why HMRC is set upon investigating and they are not dropping cases despite the possibility of sensible settlements.
With this in mind, companies’ accounting department should have insurance against tax investigation in order to cover their bases financially because of the longer time settlement.