During the 2010-11 tax year, HMRC carried out an increased number of investigations into the avoidance of VAT, which resulted in a tax yield of £1.34bn from some of the larger UK companies. Investigations during the 2009-10 tax year brought in £443m for the Treasury. The number of new investigations into VAT avoidance increased by 42 per cent during that period. According to data which has been obtained by Pinsent Masons, international law firm, using the Freedom of Information act, HM Revenue & Customs is taking a harder stance towards VAT compliance.
An associate at Pinsent Masons, Steven Porter, believes that there will be increased pressure on both HMRC and businesses. Although HMRC has a duty to collect the correct amount of tax from everyone, businesses need to maximise revenue. Businesses have been facing increased pressure since VAT increased to 20 per cent in January 2011. Porter said:
“With their eye on the bottom line, businesses will have been looking for ways to limit their VAT liabilities as much as possible. HMRC has responded aggressively.”
Porter called for HMRC to simplify the VAT process, as VAT inquiries can make planning difficult as they can take up to 12 months to reach conclusion. Tackling tax issues is a priority for HMRC, a spokesperson from which said:
“[HMRC] works hard to ensure that the right amount of tax is paid at the right time.”
A low cost accountants will be able to provide advice in case of a VAT investigation by HMRC.