Have your clients paid enough tax?

Published on 13th January 2020

HM Revenue and Customs may be upping the number and intensity of their investigations – which could mean that your clients could face an unexpected call from the taxman.

It is understandable enough from the point of view of the treasury. They collected an extra £9.8billion through investigations into the UK's biggest 2,000 firms last year, more than £1 billion more than in the previous tax year.

How can you help your clients avoid problems?

Who is getting investigated?

It looks as though HMRC is focusing on those sectors that have faced heavy criticism over tax avoidance in recent years. This means clients in the tech area and finance firms - which have both come under increasing scrutiny and criticism over tax avoidance. Bigger UK and foreign businesses trading in the UK may find themselves under the most intense scrutiny from HMRC over the next year.

Investigations seem to be focusing on companies that underpaid corporation tax, which helped bring in £2.6bn. VAT underpayments seem to have also come under scrutiny by HMRC.

This means that companies in the new sectors – e-businesses in particular – may be among the most likely to come under scrutiny. It can mean rich picking for the inspectors: an investigation launched into iconoclastic taxi firm Uber earlier this year could cost it up to £1bn. The ride-hailing platform does not pay VAT on fares and has always argued that it is a facilitator rather than a service provider. However, HMRC does not agree and being classified as a transportation provider would mean a 20% VAT bill slapped on Gross Bookings, or on the service fee that the Company currently charges its drivers, both retroactively and prospectively.

But your clients do not have to be an international, headline-grabbing, new wave business to be investigated. Many smaller clients are likely to be looked at closely over the next few months.

Financial businesses in the firing line

HMRC may also be targeting financial services businesses.

Large areas within the sector are of course not covered by the normal exemption from VAT: M&A advice, portfolio management fees ( however they may be structured) and some investment advice and research services are all taxable. What’s more, since the beginning of the tax year, VAT exemption rules were changed: as a result, insurers and providers are no longer allowed to treat pension fund management services as exempt from VAT.

What is prompting this initiative?

The latest Government spending pledges may be good news for the taxpayers who will benefit - but they mean HMRC and the Treasury will be under pressure to raise more money to deliver them.

Of course, there is the downward pressure on the economy from Brexit. This means that revenue is a little slower coming in than the chancellor would like – but he seems to be taking the view that big businesses will not be put off investing in the UK simply because of the tax environment.

It means the net result is that HMRC has been urged to continue to push very hard wherever it sees the possibility of underpaid tax.

Are your clients concerned about tax issues with HMRC? Would you know how to advise them on a finance product to ease cashflow issues due to a tax investigation? Find out more about partnering with Rangewell to find finance solutions for your clients

What are they looking for?

In an inspection, HMRC inspectors will be looking for anything that suggests any kind of tax has been unpaid.

This can, of course, include corporation tax, although this may be fairly straightforward, and any errors easy to sport before the knock on the door.

In fact, VAT may be an even more important focus for inspectors than other types of tax. VAT has become complicated and, as a result of these complications, underpayment of VAT is now believed to be a major problem for the treasury. HMRC estimates more than 9% of all VAT due is unpaid. This is believed to be around £12.5billion in the current year, and showing a steadily upward trend.

What can you do to help?

Making sure that your clients pay all the tax that they are obliged to do is, of course, the simple answer. With some kinds of business - and particularly those in the new sectors that have opened up in recent years, where business models can be very different from traditional models - understanding and interpreting the rules and regulations can be a challenge in itself.

But what can you do if, despite your best efforts, an inspection uncovers a large unpaid liability? Having to find a large cash sum in a short period can mean major problems for any of your clients who have been tripped up by complex rules.

The answer is to partner with Rangewell.

At Rangewell, we are experts in business finance. We help all types of business access all types of funding - including funding for tax bills.

We have an expert team made up of specialists in business funding and we work with all types of business finance products from lenders across the entire UK market. So when you have a client who runs into a problem with their tax bill you can simply call on us to help you find the solutions they need.

We can find solutions that will spread the cost of VAT, or help find a cash lump sum when the shortfall is a big one.

Not only are our services free for you to call on, we make no charge to your clients. In fact, we are able to pass commission from lenders on to your practice.

To find out more about working in partnership with Rangewell to find better answers to your clients' funding needs, simply call us.


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Richard Mitchell

Richard Mitchell

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