HMRC suspends some tax investigations due to pandemic

HM Revenue & Customs has suspended some investigations into taxpayers and businesses due to constraints on resources during the coronavirus crisis. 

Accountants report that the UK tax authority has written to taxpayers currently under investigation, stating it will not request information or documents during the current lockdown, nor press for responses to requests already made. In some cases, HMRC has said it will temporarily suspend inquiries. 

The move comes as the tax authority faces an unprecedented challenge in administering the government’s coronavirus job retention scheme for furloughed workers. 

Jim Harra, permanent secretary and chief executive of HMRC, told MPs on the Treasury select committee last week that the technology was being tested and had the capacity to handle 450,000 claims an hour when it goes live on April 20. 

HMRC confirmed that the tax office was prioritising support for businesses and individuals and was doing everything possible to protect individuals, businesses and the economy during this extremely difficult time.

The tax authority added: “HMRC will always take tough action against fraudsters who attempt to deprive the UK of the public funds the government needs to support the nation at this difficult time.”

However, tax advisers are warning those under investigation not to be lulled into a false sense of security. 

“Putting off HMRC’s queries until after this difficult period is over may not be as good an idea as it sounds,” said Fiona Fernie, tax dispute resolution partner at Blick Rothenberg, the accountancy firm. 

She said that for some businesses, it would be sensible to use time under lockdown to deal with an HMRC inquiry rather than store up problems for the future. “If tax is due, it is still going to be due when we come out of this,” said Ms Fernie.

“[After lockdown ends] many will need to be concentrating hard on reviving their business and HMRC’s questions will inevitably distract attention from that at a time when loss of focus on business management could be potentially devastating”.

Dawn Register, partner in tax dispute resolution at BDO, said that while it was encouraging that HMRC was looking to help businesses and individual taxpayers impacted by Covid-19, it was not cancelling inquiries nor writing off any tax due.

“HMRC is instead offering a ‘temporary pause’ for those who require it,” said Ms Register. “People should remain mindful that HMRC will still take a dim view of those perceived to be abusing their new tack.”

However, HMRC has separately said it will continue to send out letters during lockdown to some taxpayers facing the controversial loan charge, some of which require a response within 30 days. 

When pressed by the All Party Parliamentary Group (APPG) for the loan change, the tax office said it was aware of the difficulties people were facing but was unable to stop pursuing anyone who provided information to HMRC about their involvement in the avoidance schemes by April 2019 due to statutory time limits on collecting tax.

It added that individuals who had not provided HMRC with details on their loan arrangements by April 2019 would not be sent letters. Last month, HMRC said that “special arrangements” would be put in place to ensure those liable for the loan charge could “benefit from the self-employed income support scheme where appropriate”.

Coronavirus and your money

Giving business and individuals the opportunity to defer tax bills is another one of the ways that the government is offering support to those impacted by Covid-19. 

HMRC added that it was focused on helping individuals who need additional time to pay because of the coronavirus and had set up a dedicated helpline to deal with this manned by 2,000 staff. The number is 0800 024 1222.

To access “time to pay” arrangements, taxpayers will need to be able to provide information which demonstrates why they need extra time to pay, and the impact that Covid-19 has had on them financially. 

They will also need to agree a proposed timescale for deferral of the tax, be able to present a plan for repayment and show that the payment plan is affordable.

Ms Fernie said: “For businesses, that will probably mean provision of management accounts and preparation of a cash flow forecast. They may also be asked to show the level of their cash reserves. Individual taxpayers are likely to need monthly income and expense statements and a statement of personal assets and liabilities.” 

She added that the longer the period being requested for time to pay, the more evidence HMRC was likely to require.

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