'HMRC investigations' tide now turning -- against taxpayers'

The lull in tax investigations which HMRC announced in wake of covid-19 has been declared all but over, particularly in relation to the Coronavirus Job Retention Scheme.

In fact, on top of the Revenue estimating fraud from the furlough scheme to be standing at £3.5billion, the department has launched enquiries into some 27,000 ‘high risk’ CJRS claims.

In addition, while data show that it more than halved its tax probes total (just 7,000 in April versus 16,000 last April), HMRC ratcheted them up from June to July by 40% to 14,000.

'Tide now turning'

While that total is still some way off the 29,000 investigations conducted last June, experts indicate that it marks a starting pistol from HMRC that the non-compliant ought to beware.

“After the lull in new tax investigations at the start of the pandemic, as HMRC staff were diverted to Covid-19 support schemes, the tide is now turning,” says Guy Smith of inTAX.

The tax manager’s colleague Jacqui Fleming, who specialises in COP 9 enquiries, added: “[Tax] investigations [slowed] in the wake of coronavirus, primarily to man the helplines.

“HMRC also told me they need to be seen to be considerate in light of Covid. [But that was] closely followed by a rather amusing comment – ‘we’ll be back to normal soon.’”

'8,000 fraud whistleblowers'

Ironically, that normal capacity now looks vital due to the spike in tax non-compliance related to state support schemes meant to help taxpayers adjust to the ‘new normal.’

“Many of the [27,000 high-risk CJRS] cases are due to be investigated after evidence that has been supplied from the 8,000 individuals who have already called HMRC’s dedicated hotline to deal with furlough scheme fraud,” says Laura Bolton, a director of Simple Accounting.

But tax dispute resolution specialist John Hood says HMRC “has its work cut out,” if it wants to investigate the 27,000 cases “effectively.”

Nonetheless, the Revenue has the power to charge penalties of up to 100%, and “it is likely that the most egregious cases will be considered for criminal investigation,” Hood warns.

'October amnesty expiring soon'

The high-end, larger accountancy firms are already on the case with the enquiries, with Grant Thornton and PwC among those saying they are representing some of the 27,000.

“If challenged there is a potential impact on the Job Retention Bonus,” says PwC senior manager Matthew Bridger.

Over at the Big 4 firm’s tax division, another manager James Walkerdine said: “We are supporting employers with health check and governance reviews in advance of the 20th October amnesty expiring.”

'Deluge of enquiries'

He was referring to some firms needing to go forward to HMRC to specify overpayments or other errors in their CJRS claims by next Tuesday (alongside two other potential deadlines).

“HMRC undoubtedly has to find some way of recovering the money paid out under the various Covid schemes,” reflected inTax’s Ms Fleming.

“[So] we can expect a deluge of enquiries. Just what’s needed after the stress of Covid.”