Changing accountants and risk of investigation by HMRC

[tenerosw]

I've read (in the small print of tax investigation insurance) that changing accountants increases your risk of being investigated by HMRC. Does anyone know if this is really true or are able to offer anecdotal evidence either way?

We have nothing to hide but am thinking about changing accountants to find one with a more appropriate pricing structure for our business. Our requirements have changed rapidly since formation just over two years ago. If we switch, it would be the second accountant switch we've been through since starting up.

Are we asking for trouble?

Thanks!

[northernladuk]

I would have thought the entire accountacy trade would be up in arms if this was true. Kinda stops people changing unfairly don't you think?

[SackmanandCo]

No its not true. The only risk is if you change every year- HMRC might wonder why that is. The real risk is IR35.

[Alan @ BroomeAffinity]

There is truth in it. I remember reading in an HMRC internal manual that there was a default position that the a reason a trader would move accountants is because the old accountant was unwilling to collude with the trader in dodgy practices and therefore a closer look might be merited.

Having said that, I can't think of ever having an investigation on one of my clients because they have moved. If you keep your nose clean, file on time, pay on time, answer any correspondence promptly there would appear to be less chance of an enquiry. If there are any signifcant changes in your accounts whihc could trigger an enquiry ie. fall in turnover or profits, its a good idea to explain these deviations in a covering letter.

[philip@wellwoodhoyle]

It may have been true once, but I can't see that HMRC would even notice a change in accountants these days. In the old days, they'd have a paper file so a quick look through would highlight different accountant letterheads which could have triggered an element of doubt in a tax inspector's mind. Nowadays, it's all scanned or auto-populated on their computer screen and they can't readily access a "history" in the same way - many tax office staff have told me that they can only see the current year on screen and don't have access to past years so they'd never even know if an accountant changed as all they're looking at is "live" current data. Obviously some of the more senior staff will have access to older data via different systems or enhanced user-access, but it's probably not something that they're looking at too much these days.

[kontracta Matt]

It's not something that I'm aware of. The cynic in me would say that at worst it could be used as a marketing 'idea' by insurance agents or fellow accountants. Or that it could be something that the HMRC choose not to deny if they become aware of the rumour.

Changing auditors each year is likely to raise a red flag for new auditors and eventually for the taxman but I'd doubt if the same could be said for accountancy work. As has been mentioned above I doubt the HMRC would have either the IT, time or inclination to look but it's good that you've raised the question.