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SME’s face HMRC investigation risk over "missing" VAT says Yorkshire accountants

SME’s and sole traders who trade in cash face an increased risk of being investigated by HMRC after recent figures revealed the organisation believes the amount of money it is missing out on, through unpaid VAT, has increased by 25% in the last 12 months.

As a result West Yorkshire based chartered accountancy firm Clough & Company is warning that taxpayers operating in cash-reliant sectors are now much more likely to be investigated as HMRC increases its tax investigations in 2014.

Nigel Westman, partner at Clough & Company, (pictured below) explains: “It’s more important than ever that businesses that trade heavily in cash, such as retailers and tradesmen, have their VAT affairs in order.

“HMRC estimates that the gap in unpaid VAT increased by £1.5bn in just 12 months which is why it has said that it wants to find the minority who aren’t paying what is due, and to protect the vast majority of honest businesses and individuals from being cheated by these unscrupulous operators.

“Even if there has been no deliberate avoidance of VAT, businesses that regularly receive cash payments could still find themselves subject to in-depth compliance checks through HMRC’s intervention process as they increase their level of VAT-related investigation activity.”

The checks can involve a detailed inspection of the taxpayers records, review of relevant documentation by multi-disciplinary teams, meetings with taxpayers to consider the adequacy of their records and enquiries in respect to any discrepancies that are uncovered.

HMRC has stated that it believes in a collaborative approach and that it always seeks to achieve a settlement wherever possible. Nigel adds: “The key for these types of businesses is to get specialist advice from a tax professional who can deal with potentially contentious tax issues and advise on how to maintain adequate records.

“With the right guidance, most investigations can be settled before reaching a Tax Tribunal or the Courts which saves a lot of stress.”

This was posted in Bdaily's Members' News section by Clare Burnett .