With HMRC investigations becoming increasingly sophisticated, Chartered Accountants Monahans have issued a warning to people to ensure their tax returns are accurate.
HMRC’s Connect database collects information from a wide range of public and private sources, including councils, banks and even people’s social media accounts. It correlates the information and any possible anomalies are flagged for investigation.
This means that anyone posting news of holidays, new homes, home extensions or the like could put themselves at risk. Even if an investigation proves that financial records are accurate, the hassle and upheaval of an investigation can create major issues for people.
Mike Shawyer, managing partner at Monahans, said: “HM Revenue and Customs now claims it now holds more information than the British Library. The result is that they no longer target only those whose tax returns seem unrealistic or suspect, as they have in the past. Inspectors are now basing 80 per cent of their investigations on the leads that Connect gives them, which means innocent people are unexpectedly finding themselves subject to a long, time-consuming and potentially very expensive investigation.
“When Connect identifies that you’ve put up photos on social media from an expensive holiday destination or have paid for your daughter’s wedding, and the source of funding isn’t immediately transparent, you’re likely to appear on a suspect list. If profits in your company have dipped, but you still managed to extend your house, a red flag will go up.
“The fact that you have a completely innocent explanation when challenged is irrelevant. Once an investigation is launched, every detail of your financial situation and lifestyle will be picked over – in a long process that could seem to take over your life.”
To protect themselves against unnecessary investigation, Monahans offers clients affordable insurance against the substantial costs of tax investigation, so that if your tax return is accurate but you’re unlucky enough to get a red flag against your name, they’ll take the burden off you.
For more information, visit www.monahans.co.uk or call your local office on 01793 818300