http://www.timesonline.co.uk/tol/mon...cle5485166.ece
Higher-rate taxpayers and those who are self-employed face a greater risk of a tax investigation, as the Revenue deploys tougher tactics to fill a £7 billion black hole in Treasury coffers.
Simple mistakes in tax returns, big changes in income or expenses from last year or big purchases risk triggering an inquiry by Revenue investigators, tax experts told The Times.
Buy-to-let property investors, wealthy individuals, savers with offshore or foreign accounts and self-employed people who have had a drop in turnover are most at risk, accountants said.
The financial details of partners in law firms or medical practices are expected to be examined closely. Barristers are also under the spotlight because the taxman thinks that they may have been fiddling expenses, including the costs of cleaning gowns and wigs.
Under new guidelines a rise in expenses of 10 per cent year-on-year could prompt a tax investigation, compared with the previous threshold of a 20 per cent variation.
More than a million buy-to-let landlords, who have been battered by the devastating collapse in property values in the last year, face further headaches as investigators examine their tax returns.
Tax experts warn that the Revenue's recently updated computer systems are red-flagging anything out of the ordinary in the search for evidence of tax evasion.
The taxman has the power to investigate any one of the millions of self-assessment returns it receives each year.
Last year the Revenue looked into the affairs of more than 62,100 individuals, but this year that number is expected to soar.
If it uncovers a mistake, taxpayers could face a hefty penalty. In rare cases where the Revenue proves that a taxpayer knowingly committed fraud, it has the power to prosecute.
The Government is facing a £23 billion shortfall in tax receipts as the economy slides into recession - the first decline in annual tax receipts year-on-year for more than a decade. Accountants say this has coincided with a more aggressive approach from Revenue & Customs, focusing on more than nine million taxpayers due to submit a self-assessment return by the end of this month.
Mike Warburton, of the accountants Grant Thornton, said: “The Government is short of money. HMRC is under growing pressure to boost tax take and it is already doing that by launching more investigations.”
Every year the authorities target groups thta they think are routinely flouting the rules. In the past, builders and eBay traders have faced special scrutiny. Anita Monteith, a tax manager at the Institute of Chartered Accountants in England and Wales, said: “If you have switched bank accounts in the last year or made a big purchase, such as a holiday home, you could flash red in the Revenue's eyes and become subject to costly and time-consuming tax investigation.”
While putting greater pressure on HMRC to increase the taxes it collects, the Government has also cut staff numbers, leading the Revenue to take more creative or desperate steps to recover lost income. Last year the Revenue admitted that it paid £100,000 for the personal banking records of up to 100 Britons that had been stolen from a Liechtenstein bank.
HMRC argues that it uses risk-based assessments to target taxpayers whom it suspects are committing fraud.
However, tax experts warned that an increasingly desperate Revenue would drag more innocent taxpayers into lengthy investigations.
John Whiting, of the Chartered Institute of Taxation, said: “It is inevitable that there is more pressure on the Revenue to raise the amount of cash it collects for the Government.”
In the Pre-Budget Report last month the Treasury had dramatically to reduce the amount it was forecast to receive from tax this year, from £470 billion to £447billion. In 2007-08 it collected £451 billion.
The Treasury has forecast that gross domestic product will fall in the first half of this year before rising again in the last six months.
However, Citigroup, the American bank, believes that Britain's economy will shrink by 2.5 per cent this year - the biggest fall in 60 years.
Self-assessment forms submitted this month relate to the 2007-08 financial year, which ended in April, but tax experts say that the Government could use the extra cash it collects to balance the books for the current year.
Tax return do's and don'ts
DO file your tax return by January 31, or you face the threat of a £100 fine. Last year, nearly 900,000 taxpayers were fined for filing late.
DO register quickly for the Revenue's online service if you have never filed on the web before. The deadline for submitting a paper self-assessment form was October 31, so the only way to file now is online. Visit hmrc.gov.uk and click on “self-assessment”. The Revenue should send you an activation PIN within five working days.
DO offset expenses to cut your tax bill. It is surprising what you can claim. Mike Warburton, of Grant Thornton, the accountant, said: “I had a client who ran a consultancy from home and was able to claim 50 per cent of the cost of employing a gardener. They argued that the success of the business depended on them keeping their gardens in trim.”
DO double-check your form for any errors. The trigger for most investigations is a discrepancy on a form.
DON'T leave it until the last minute to file your return. The Revenue has warned that the days leading up to January 31 are likely to be very busy, raising the chances of the online system slowing down or even crashing. Last year, a record 204,000 taxpayers submitted online returns on January 31.
Higher-rate taxpayers and those who are self-employed face a greater risk of a tax investigation, as the Revenue deploys tougher tactics to fill a £7 billion black hole in Treasury coffers.
Simple mistakes in tax returns, big changes in income or expenses from last year or big purchases risk triggering an inquiry by Revenue investigators, tax experts told The Times.
Buy-to-let property investors, wealthy individuals, savers with offshore or foreign accounts and self-employed people who have had a drop in turnover are most at risk, accountants said.
The financial details of partners in law firms or medical practices are expected to be examined closely. Barristers are also under the spotlight because the taxman thinks that they may have been fiddling expenses, including the costs of cleaning gowns and wigs.
Under new guidelines a rise in expenses of 10 per cent year-on-year could prompt a tax investigation, compared with the previous threshold of a 20 per cent variation.
More than a million buy-to-let landlords, who have been battered by the devastating collapse in property values in the last year, face further headaches as investigators examine their tax returns.
Tax experts warn that the Revenue's recently updated computer systems are red-flagging anything out of the ordinary in the search for evidence of tax evasion.
The taxman has the power to investigate any one of the millions of self-assessment returns it receives each year.
Last year the Revenue looked into the affairs of more than 62,100 individuals, but this year that number is expected to soar.
If it uncovers a mistake, taxpayers could face a hefty penalty. In rare cases where the Revenue proves that a taxpayer knowingly committed fraud, it has the power to prosecute.
The Government is facing a £23 billion shortfall in tax receipts as the economy slides into recession - the first decline in annual tax receipts year-on-year for more than a decade. Accountants say this has coincided with a more aggressive approach from Revenue & Customs, focusing on more than nine million taxpayers due to submit a self-assessment return by the end of this month.
Mike Warburton, of the accountants Grant Thornton, said: “The Government is short of money. HMRC is under growing pressure to boost tax take and it is already doing that by launching more investigations.”
Every year the authorities target groups thta they think are routinely flouting the rules. In the past, builders and eBay traders have faced special scrutiny. Anita Monteith, a tax manager at the Institute of Chartered Accountants in England and Wales, said: “If you have switched bank accounts in the last year or made a big purchase, such as a holiday home, you could flash red in the Revenue's eyes and become subject to costly and time-consuming tax investigation.”
While putting greater pressure on HMRC to increase the taxes it collects, the Government has also cut staff numbers, leading the Revenue to take more creative or desperate steps to recover lost income. Last year the Revenue admitted that it paid £100,000 for the personal banking records of up to 100 Britons that had been stolen from a Liechtenstein bank.
HMRC argues that it uses risk-based assessments to target taxpayers whom it suspects are committing fraud.
However, tax experts warned that an increasingly desperate Revenue would drag more innocent taxpayers into lengthy investigations.
John Whiting, of the Chartered Institute of Taxation, said: “It is inevitable that there is more pressure on the Revenue to raise the amount of cash it collects for the Government.”
In the Pre-Budget Report last month the Treasury had dramatically to reduce the amount it was forecast to receive from tax this year, from £470 billion to £447billion. In 2007-08 it collected £451 billion.
The Treasury has forecast that gross domestic product will fall in the first half of this year before rising again in the last six months.
However, Citigroup, the American bank, believes that Britain's economy will shrink by 2.5 per cent this year - the biggest fall in 60 years.
Self-assessment forms submitted this month relate to the 2007-08 financial year, which ended in April, but tax experts say that the Government could use the extra cash it collects to balance the books for the current year.
Tax return do's and don'ts
DO file your tax return by January 31, or you face the threat of a £100 fine. Last year, nearly 900,000 taxpayers were fined for filing late.
DO register quickly for the Revenue's online service if you have never filed on the web before. The deadline for submitting a paper self-assessment form was October 31, so the only way to file now is online. Visit hmrc.gov.uk and click on “self-assessment”. The Revenue should send you an activation PIN within five working days.
DO offset expenses to cut your tax bill. It is surprising what you can claim. Mike Warburton, of Grant Thornton, the accountant, said: “I had a client who ran a consultancy from home and was able to claim 50 per cent of the cost of employing a gardener. They argued that the success of the business depended on them keeping their gardens in trim.”
DO double-check your form for any errors. The trigger for most investigations is a discrepancy on a form.
DON'T leave it until the last minute to file your return. The Revenue has warned that the days leading up to January 31 are likely to be very busy, raising the chances of the online system slowing down or even crashing. Last year, a record 204,000 taxpayers submitted online returns on January 31.
Comment