UK
David Redfern, an expert in tax preparation and founder of DSR Tax Claims, has highlighted the negative impact and financial uncertainty that prolonged HMRC investigations can have on businesses. He calls for HMRC to commit more resources to ensure that tax enquiries are completed at a swifter pace.
Noting that the average enquiry into a large business had risen to nearly 3 years in the previous tax year (34 months up to March 2017), Redfern stated that "even though these investigations can be expected to take some time, due to the size and complexity of the businesses being inspected, the uncertainty that these businesses will face in terms of their business planning and financial reporting will impact upon their ability to do strong business".
He added that although larger companies could often cope with such prolonged compliance checks, he was disappointed to note that investigations into smaller businesses could still take up to 16 months, sometimes longer if appeals were made.
“It can be devastating to small businesses to be plunged into financial limbo for such a length of time, often spanning well over a tax year, and very often without the resources that large companies have to manage such uncertainty,” he said.
Redfern accepted that there were resourcing issues at HMRC, not just within the Large Business Directorate, which is tasked with investigating the tax affairs of the UK's 2,100 largest and most complex businesses, but also with the departments responsible for dealing with smaller businesses and individuals.
However, he believes that it is unreasonable that businesses should bear the brunt of the lack of HMRC resources. “It is absolutely appropriate to expect that all businesses, large and small, should be paying exactly what they owe in terms of taxes and HMRC have the right to investigate those they believe aren't playing by the rules, but in such times of job insecurity and business hardship, they shouldn't be actively making things difficult for businesses and should commit the resources to make the taxation system work properly and equitably for all".
He finished by asserting the importance for companies and individuals of getting their taxes correct in the first instance.
