Self-Employed: HMRC want to interview me!

Annouck

Help! Even though my hubby's business is taking less and less each year due to the economy he has paid more tax this year than ever before - the bill came through 2 weeks ago and was almost 3 times what he usually pays. He now has a hefty credit card debt.
Despite this he received a letter from HMRC on Saturday asking for him to call them and to provide detail of his bank statements etc.
Has anyone else experienced this? I assume they're now double-checking or randomly picking people out, but he's beside himself with worry that he's done something wrong and is already reaching the limits on credit cards. Any advice much apreciated.

aveylee

I am an accountant but I mainly dealt with VAT rather than SA. However I do know that HMRC have recently recruited some 500 extra enforcement and compliance officers to look into more tax returns than ever before; and that these officers are now coming on stream.

It would likely be one of those officers who sent the letter.

These officers are allocated cases on two basis.1) a few random cases. 2) Where HMRC's risk systems indicate a 'risk' that tax may be being underpaid.

It may be that its just a random check but that is unlikely. More likely the system believes that the reducing tax paid may be an indicator of tax evasion or avoision. However these risk assessments are blunt instruments and not very reliable.

If your husband has business records indicating the drop off in trade than HMRC will close the compliance check, and that will be the end of it. (Even HMRC officers know its tough out there at the moment).

On a separate point I assume that the bill you refer to are his 'Payments on Account'. These are based on previous years figures. If his business has dropped off significantly he can ask to have these payments reduced (form SA303 off the top of my head).

My advice is not to panic, its probably just a fishing exercise by HMRC to ensure that he is paying all the tax he should. However if he has made a mistake on his taxes than watch out, these officers are being pressured to seek additional income through handing out 'penalties'.

Annouck

Thanks so much aveylee. It's certainly tough out there for him at the moment and it's certainly getting worse. He sends all his invoices/spreadsheets and details through to his accountant who prepares his end of year accounts for submission for him, so the records should be all above board. I do know that his accountant puts in everything he can for him - petrol expenses, van costs, laundry - but if they are all claimable against tax then that should be fine. He's just a bit concerned that he won't be able to find every single invoice that he's ever issued or received and much of what he brings in doesn't hit his bank account but gets paid out immediately on stock - in fact, it's probably that fact which makes his accounts look different to his bank account alone. I'll advise him of for SA303 though!
Thanks again - really appreciated.

chrismac1

Your accountant should surely be dealing with this, if it is a formal enquiry. Also if you have tax investigation insurance - £90 per year, sounds like you don't have it but should maybe consider this - then even if HMRC get silly about this, your accountant can respond to every silly question with you safe in the knowledge that the costs are all covered.

Annouck

Thanks chrismac1. Well, I did say that the Accountant should be dealing with the HMRC and not the hubby, but the letter was to him and asking him to call, so today he has called. This is after an entire day of fretting and reading through his Accounts in case anything was wrong. Everything sounds fine though; she was pretty understanding and he's explained the gap between bank income and accounts income. Just statements to do, but has been told not to worry. Cheers for the help, all useful and we'll look into that insurance; if there is a business left by the time this government finishes with the economy that is!:beer: