HMRC Self Assessment Investigation

I had an informative meeting with an HMRC tax inspector this morning. A random check on a sole trade general builder generated a new client for me & some extra revenue in fines for the HMRC.

Wind back a couple of months and ‘Mr X’ gets in contact. He’s been doing his own self assessment for the best part of 18 years and he’s had a letter from HMRC, a random check of his 2015/16 self assessment tax return. Mr X would like us to review what he’s submitted to HMRC to check everything is OK, before he just hands all his paperwork over. We review the whole return and discover:

  1. Missed income
  2. Expenses that aren’t tax deductible
  3. Exceeded the VAT threshold
  4. Should have been registered for construction industry scheme (CIS)

We compose a letter back to HMRC explaining that we are now assisting Mr X and we have discovered all these discrepancies. An exchange of emails and a large parcel of paperwork to the HMRC later and they want a face to face discussion. Mr Tax Inspector and his colleague turn up to my office this morning, along with Mr X, to analyse the information provided to them.

As we had fully disclosed the errors and acknowledged there is interest due on extra tax and potential fines for non-compliance the tax inspector proceeded to scrutinise:

  1. Out of sequence numbers in the invoice numbering
  2. Where does your work come from
  3. How do you quote for jobs
  4. Why do you stay away from home

When covering the issue of not being registered for VAT or CIS, the explanation on why both had been missed was noted but as he is a self assessment inspector and not VAT or CIS he couldn’t comment and would have to take it back to his colleague.

Although a worthwhile exercise to answer all of his questions in one go, was rather a frustrating use of 2 hours of our time.

During discussion with Mr X afterwards he acknowledged that, what he will pay us for bookkeeping and tax return submission is valuable to ensure that tax rules and regulations he doesn’t understand, or even know nothing about, are met.

We specialise in bookkeeping and payroll for the construction industry and keep on top of changes to the legislation, so our clients don’t have to.

Having never worked through a tax inspection before, the experience for LilyIris Accounting means we can assist clients with inspections in the future. Random selections or as a result of an industry campaign.

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