Simmers & Co
Topical Points Answer
There is no doubt that the number of tax investigations undertaken by HMRC is increasing and that they are using Risk Assessment to decide on which taxpayers should be examined. A VAT or Tax inquiry can happen to anyone as you can be chosen at random and may have done nothing wrong. You are more likely to have a VAT investigations than a tax inquiry. The process is extremely stressful, disruptive and it may be costly.
Falling yields from recent investigations have caused the government to "get tough" and this policy covers everyone, not just those seeking to evade tax. To maximise the yield of extra tax from inquires, the Revenue are using Risk Assessment techniques to identify those businesses most likely to yield the biggest amounts from investigation and the tax authorities are becoming very proficient in using these techniques. They claim there is no single factor which will expose a business to investigation but rather a combination of factors.