Business owners should be aware that HMRC investigations often focus on the number of businesses that might be underpaying their employees’ payroll tax and National Insurance.

At the most extreme end of the spectrum, payroll tax evasion can include an employer keeping all of their employees’ PAYE tax and National Insurance with the intention of disappearing with the money. But more commonly HMRC will be looking for something like a member of staff being given job perks, such as gym membership or a company car, without paying tax on that perk.

“Real Time Information”

Since HMRC implemented the “Real Time Information” regime they are able to launch more investigations into payroll irregularities as they are now receiving monthly, rather than annual updates on benefits provided to employees.

It is expected that investigations into payroll irregularities will continue to rise as HMRC mines this information.

What HMRC Investigations may challenge

Here are just a few examples of what HMRC could look at:-

  • Payments of a large tax-free lump sum on the termination of an individual’s employment – to ensure that the employee was genuinely made redundant.
  • Ensuring that expat employees are being charged tax on any work they do when they are in the UK.
  • Hidden employees – staff being paid as contractors (i.e. with no employer’s NI being paid) when they should be treated as an employee.

The increases in payroll tax investigations is another example of HMRC’s highly aggressive approach.

Even compliant businesses can be smothered with significant costs in dealing with these investigations, especially as the initial investigation can spiral into other matters if HMRC uncovers an additional line of enquiry that it wants to follow.

Businesses need to be prepared for such eventualities. THP’s Tax Investigation Service can protect you against the professional costs involved in most types of tax investigations. If you don’t already subscribe to our service please contact your Client Manager who will discuss our service with you in more detail and make sure you are protected.

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About Karen Jones

Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

Karen’s specialist skills:

  • Personal Taxation
  • Tax Efficient Planning
  • Trust Administration
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