HMRC Investigations - PAYE, Tax and Furlough Grants

18 August 2020

HMRC Investigations

Every year thousands of small businesses face investigations into Tax, PAYE and VAT and now furlough grant claims will be added to the enquiry list. Recently we have seen the first investigations and arrests regarding the CJRS grant claims. As time goes on we are sure that HMRC will investigate more claims and instigate investigations, claw backs or legal action where they think an incorrect amount or fraudulent claim has been made. If you are worried about your Furlough claims please give us a call now on 01379 640555.

What can you do?

We offer a Fee Protection service to help cover accountancy fees incurred by the client when HMRC investigate. Any professional fees incurred for work in assisting with the investigation will be covered. You can find out more by viewing the Fee Protection Service leaflet here. The furlough calculations have at times been difficult to get right due to changing criteria and the inevitable fluctuations of the payroll calculations, working hours and employees. You can correct your claims, and we advise that you do so if something has changed following your calculation of a submitted claim. While the service will not cover any tax owing or grant discrepancies, it will cover the fees from your accountant when you ask for their help in providing the information HMRC requires. Even if HMRC find nothing owing or out of place, there will still be fees incurred from your accountant.

What can trigger an investigation?

Sometimes nothing at all – you may just be on their list. HMRC can target particular industries and sectors that are high risk, for example those where multiple cash transactions can be involved. They use a series of common markers such as tax returns not supporting standard of living, a large fall in income, increase in costs or inconsistencies. HMRC could of course receive a tip-off or if you are consistently late with returns this could flag up on their system.

How does it work?

HMRC will contact you by writing or contacting you by phone. They will organise to visit you and ask to see the information relating to their area of investigation. An investigation doesn’t necessarily mean you have done something wrong. You will need to provide information on your Accounts, Payroll, VAT, Furlough Grant and supporting documents. HMRC make a decision, based on their investigation, and confirm if you have underpaid or overpaid any tax and outline any other issues such as incorrect furlough grant claims or fraud. Much of the information regarding Furlough claims reminds constantly that you must keep your records and calculations. This is the government advice: Please ensure you keep:

  • the amount claimed and claim period for each employee
  • the claim reference number for your records
  • your calculations in case HMRC need more information about your claim
  • usual hours worked, including any calculations that were required, for employees you flexibly furloughed
  • actual hours worked for employees you flexibly furloughed

If you maintain and keep accurate records, send your submissions to HMRC on time and keep up to date with your tax you may reduce the risk of a tax investigation. Keeping accurate records is good management practice for any business.

What should you do first?

If HMRC contact you with notification of an investigation the first thing you must do is contact your accountant. If you have Fee protection the fees incurred for your accountant to gather information and deal with HMRC on your behalf will be covered. Our Fee Protection Service means you don’t need to panic.

As Accountants we have dealt with many investigations and understand how they work and will have experience in resolving cases. It is worth mentioning that having an authorised agent, ie someone who deals with your accounts with HMRC on your behalf, does not transfer any of your legal obligations. Even if HMRC find no tax owing, you will still have to pay your accountant or advisor for their time and help.

If you are interested in finding out more about Fee Protection Insurance with Haines Watts please give us a call now on 01379 640555. To find out more about Haines Watts in Diss please visit our website here or to view a selection of case studies please click here.


Ed Stott

Associate Director