HMRC Intensifies Scrutiny on Taxes: Who’s Affected & Actions to Take
HMRC is turning up the heat with increasing checks on tax compliance across the board.
They are particularly focusing on inheritance tax, undeclared dividends, and the profits from share sales, ensuring that everyone pays their fair share.
Both individuals and businesses must understand their tax obligations to avoid coming under scrutiny from HMRC.
In this blog, we will discuss the specific tax compliance checks that HMRC conducts, who could be affected, and what steps individuals and businesses can take to ensure their compliance.
What Checks are HMRC Doing and Who is Affected?
- o Inheritance Tax (IHT) Accounts: HMRC is examining the accuracy of Inheritance Tax accounts.
They are checking that relief claims – particularly those for business property relief – are valid.
They are also verifying that assets like unquoted shares and properties have been correctly appraised.
- o Undeclared Dividend Income: HMRC is targeting individuals and company owners who may not have declared dividend income.
They are comparing reported company profits and reserve movements to identify undeclared dividends.
Their goal is to address tax evasion and ensure fair taxation on income from dividends.
- o Gains from Share Disposals: HMRC are also focusing on individuals who have sold shares but may have omitted this information from their tax returns.
They will be comparing data to identify discrepancies, ensuring capital gains tax related to share disposals is accurately reported and paid.
Actions to Take to Avoid Penalties from HMRC
For IHT Accounts:
- Ensure that claims for reliefs are accurately made and supported by documentation.
Business property relief can offer 100% relief from IHT, but eligibility needs careful assessment, particularly if a business holds substantial cash or investment assets.
- Obtain formal IHT valuations for significant assets, especially unquoted shares, property, and jointly owned assets.
Look at this comprehensive HMRC guide to valuing an estate for IHT.
- Be aware of the IHT payment deadline to avoid penalties.
The IHT payment deadline is stringent, requiring payment within six months after the end of the month of death. This timeline is significantly shorter than those for most other taxes.
For Dividend Income:
- Ensure your company accounts and personal tax returns accurately report all your income from dividends.
- Respond quickly to any correspondence from HMRC, even if you believe you have no undeclared dividend income, to avoid any compliance checks.
For Share Disposals:
- Keep detailed records of all your share disposals, including dates, amounts, and any calculations for your gains or losses.
- Amend your tax returns within 60 days if you receive a letter from HMRC about share disposal discrepancies.
Expert Financial Advice to Ensure Compliance
To ensure compliance and avoid penalties for you or your business, it’s essential to maintain accurate financial records, respond promptly any enquiries from HMRC, and always seek expert financial advice when necessary.
If you've received a letter from HMRC or have any questions about your tax obligations, don't hesitate to get in touch with us.
You can give us a call on 01226 298 298 or send us a message via our online contact form and we will get back to you as soon as possible.