Will your industry be targeted by HMRC for tax investigations?
Recently figures released by HMRC show that the UK automotive industry has seen underpaid tax rise by 143% in the past year. This means that £444m of underpaid tax was reported in the sector over the past 12 months.
With this in mind, HMRC has flagged the UK automotive industry as being the fastest-growing risk for underpaid tax.
What has caused the rise of underpaid taxes in the automotive industry?
The amount of tax that HMRC thinks that the UK automotive industry is avoiding has jumped by 143% over the last year from £182.3m to £444.2m, making it the biggest increase in underpaid tax of any business sector.
The increase in suspected tax avoidance in the automotive sector means that the industry can expect to be the focus of a sharp increase in tax investigations over the next year.
Will any other industries be targeted for underpaid taxes?
Other industries that can expect to see a large rise in tax investigations include the oil & gas industry, where HMRC believes underpaid tax has jumped by 11% from £1.84 billion last year to £2 billion this year.
Retailers can also be expected to be targeted – thought to be underpaying £3.5billion in tax over the past 12 months.
Real estate businesses are also expected to be a focus for HMRC in the year ahead with the amount of underpaid tax in that sector rising from £471m last year to £493m this year.
Areas that HMRC will be looking for underpaid tax in the automotive industry and oil & gas industry will include the tax treatment of self-employed contractors that HMRC believes should really be classified as employees.
Paying a worker as a contractor rather than an employee means that the employer can avoid paying employers’ NIC.
Across the UK’s Top 2000 businesses HMRC believes that employers underpay £1.4billion in taxes relating to employment and a further £67m in taxes on expenses and perks for managers and directors.
How is HMRC cracking down on businesses that do not pay the correct tax?
Last year HMRC undertook 30 raids on the same day in an effort to crack down on retailers and restaurants using software to commit “point of sale” fraud.
There is likely going to be a continued increase in tax investigations over the next year.
The Government’s finances not looking very healthy post-COVID which means more tax investigations for UK businesses and individuals. This is similar to the sharp rise when public finances deteriorated during the global financial crisis.
The total amount of tax that HMRC believes that the UK’s Top 2000 businesses have underpaid in taxes is £34.3billion.