It’s been a busy year on the business front with Making Tax Digital and Brexit taking up a lot of time for companies, government and HMRC. In times of such uncertainty businesses may think that government agencies have more important priorities than to check whether tax returns and records are correct. As a result, they may be tempted cut corners when submitting tax returns and information to HM Revenue and Customs (HMRC).
Nevertheless, this would be an imprudent decision because whilst time might be on your side now, remember that HMRC have a long time to check the accuracy of tax returns. Up to a year, in fact.
For Self-Assessment tax returns, the normal window for commencing HMRC checks is 12 months from the date of filling the return.
For Corporation Tax, there are two periods when the enquiry window applies. The window for group companies that are not considered small is 12 months after the statutory filing date (even if the returns are received early), whilst for all other companies the same rules apply as with Self-Assessment.
However, after the initial 12 months have passed HMRC can still use its powers and open what is termed a ‘discovery check’, so long as certain conditions have been met. If HMRC did not have the information previously, for example, or the loss of tax came about due to the taxpayer or their agent acting carelessly or deliberately, then HMRC has grounds to launch a discovery check.
Discovery check are not required for PAYE, Construction Industry Scheme and VAT checks, and the initial window for such checks can be up to four years from the submission of the last return.
Where HMRC discovers that errors have arisen, it can demand the payment of the duties due (with interest and penalties as appropriate) for the following time periods:
Normal – four years from the end of the relevant time period (except for offshore taxes where the limit is now 12 years).
Careless – six years from the end of the relevant time period.
Deliberate – 20 years from the end of the relevant time period
Whilst it may be tempting for many of us to cut corners when we think HMRC has taken its eye off the ball, taxes are just as certain in times of political turmoil. Because penalties can be onerous and the government agency has a longer window than you might think, particularly if conditions are deemed as careless, you may be scoring a home goal if you take short cuts.
In the long run it pays to seek professional advice to make sure your returns are accurate to the best of your knowledge and are submitted on time.