Are HM Revenue & Customs taking a stronger line and challenging items in accounts and Tax Returns?

There are some types of business which have always interested the tax man as they are viewed as high risk and generally these are unchanged. Generally these are the types of business where customers do (or can be persuaded to) pay in cash and they fall into two main categories : retail shops and takeaways etc where not all cash may be recorded in the till and service type businesses (builders, gardeners etc) where there whole jobs (or part of the price) can be left out of the records.

At a more detailed level, there are a number of areas where we are seeing HM Revenue & Customs challenging or checking on specific items, including :

1) Travelling expenses are often being challenged particularly if these include home to site travel. HMRC appear to be much less willing to just accept that someone runs their business from home, if they have any form or regular other location.

2) Often employees and employers make assumptions that redundancy payments and other termination payments are tax free. The rules on this are complex and very dependent on the specific circumstances and HMRC are challenging the treatment regularly, often will extra tax being due. This is an area where it is vital that advice is taken before the payment is finalised.

3) HMRC will generally look into any large capital gain on a Tax Return and they are now often challenging where a property sale is eligible for Principle Private Residence relief. They have recently had a number of successes in the Tax Tribunal on this issue and these show how important it is to check the facts before assuming the relief is available.

All of our experience with these cases highlight the importance of dealing very carefully once HMRC start to look into a taxpayers affairs. If is very easy for a question or answer to be misinterpreted in the early stages of the enquiry and the impression given to be very difficult to correct later on. Unless you are very sure of your ground (both in fact and law) and your ability to express this clearly, it is almost always helpful to with someone experienced in this specialist area.