HMRC, the calm before the storm …

As you would expect there has been a reduction in HMRC activity since the lockdown period commenced back in March.  As with most industries HMRC are in the main working from home and are avoiding all customer facing compliance work, with taxpayers given extensions or the option to suspend compliance work.  Despite this compliance works has not stopped completely and we are seeing new enquiries notified and correspondence received in respect of ongoing enquiry work on a daily basis.

Through this period we have been actively contacting clients in respect of claims where we have not heard from you in some time and would encourage all our accountancy clients to use this as an opportunity to review open enquiries for which you have made a claim, make sure we have the up to date position and bring your billing up to date or issue final invoices where relevant.   

Looking forwards, what is clear is that this very much represents the calm before the storm . . . .

It goes without saying that HMRC will be mandated to check the measures that have been put in place to support the economy through the lockdown period.  It has been highly publicised that these measures require an element of self-validation and are open to abuse, that it is not practical for HMRC to check these at present, however, their attention will turn to this.

This is against a background of already increasing compliance activity.  Indeed, we saw a surge in enquiries following the introduction of the Connect system and the coinciding period of austerity, as HMRC suddenly had a wealth of new data to target with initially automated, wide scale checks.  This type of activity reduced in recent years as HMRC appeared to have completed a catch-up exercise on this data and turned their attention to Making Tax Digital (MTD).  However, towards the end of 2019 and early 2020, right until the lockdown began there was already a marked increase in HMRC activity, following the phased introduction of MTD. 

As we begin to emerge from lockdown, and undoubtedly enter a period of prolonged austerity, the demands on HMRC to generate tax yields to help fund the enormous spending through this period will be greater than ever before.  This is against a backdrop of already increasing activity and a need first and foremost to check that the measures put in place through the lockdown period have not been abused.  The latter is likely to be used as a gateway to check wider affairs and we very much expect to see a surge in enquiries, a surge that will likely be in excess of what we saw with the introduction of Connect. 

What does this mean for Tax Fee Protection Insurance? 

Where HMRC undertake a check in respect of the measures put in place to protect the economy through the current Covid 19 outbreak and it is necessary for you to be involved, the enquiry / check will be covered by the Policy, subject to the normal terms and conditions. 

Indeed, against this backdrop the protection afforded by Tax Fee Protection Insurance, at a relatively modest premium, has never had more value. 

At Vantage we have always been the first to innovate and adjust our Policy in order to ensure it provides adequate protection for your clients.  In this spirit we will of course continue to monitor HMRC’s approach to this and adapt our Policy accordingly, should it be necessary.