Late filing leaves self-assessed taxpayers open to disruptive investigation by HMRC

23 March 2017

The number of self-assessed taxpayers filing their returns late remains stubbornly high, leaving many at risk of full investigation by the Revenue. Last year 870,000 self-assessed taxpayers filed tax returns late, following a record high of 890,000 the year before. 

Late filing or errors on tax returns are a red flag for HMRC, and can be one of the triggers for a full-blown investigation. These investigations can stretch on for several weeks, or even months, causing considerable disruption and financial strain to those involved. 

Taxpayers need to ensure that they are as prepared as possible ahead of the filing deadline, to avoid last-minute delays and mistakes. Keeping detailed and organised records throughout the tax year is essential if the completion of returns is to be a stress-free process. Many find themselves in a last-minute panic because they are unable to locate receipts or necessary online log-ins and passwords. 

Helpfully, a number of online filing systems and Apps now exist to help individuals and businesses keep close track of their tax affairs. These often allow you to take and store photos of receipts, and then categorise them accordingly. 

Taxpayers also need to ensure that they clear up any uncertainty about the more complex areas of their tax return well ahead of the deadline, and seek professional advice where necessary. Rules on property, dividend incomes and pensions often, for instance, cause some confusion. Lack of surety about how to file tax returns, and work out precisely what is owed, is likely to result in delay and error.

HMRC is now able to quickly pick up any errors or discrepancies reported on a return via use of its sophisticated online software, Connect. This system cross-references a wide range of data held on each taxpayer, including information supplied by banks, the land registry, DVLA and even social media. Figures on salaries, properties, vehicles owned, bank accounts, interest paid and loans is therefore quickly accessible. 

Filing late or in a rush undoubtedly increases the likelihood of error and all taxpayers should take notice, should they wish to avoid unnecessarily close scrutiny or costly investigation by HMRC. The Revenue is no longer focused solely on High Net worth individuals with money stashed offshore or in complex structures; it is clamping down on taxpayers from all walks of life and it has the tools to do so effectively. 

January 31st was the deadline for the filing of self- assessment tax returns online - any returns filed after this date are at risk of facing penalties. 

HMRC can launch an investigation into anyone who submits a tax return and while many of these investigations are the result of targeted campaigns or perceived mistakes - HMRC are just as likely to investigate returns at random. 

Tax investigations are an unwelcome and unnecessary burden. Should such a situation occur, you may benefit from a tax investigation fee protection product which can help cover our accountancy fees to defend you. 

To find out more, please contact your local office or speak to your MHA MacIntyre Hudson advsisor

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