As stressful as they may be, HMRC compliance checks are essential, and few would argue otherwise!
Going through an enquiry however can feel like having a tornado ripping through your business. You’re innocently minding your own business and out of no-where HMRC come along and want to turn your business upside down. No problem, you do everything correctly and have nothing to hide so this should be nothing more than a passing breeze. As it lands on your doorstep however it has picked up momentum and is threatening to destroy everything you have built. You manage to stand firm, but it has left a trail of destruction in its path.
That trail is made up of:
- All the countless hours you have spent going back and forth with HMRC, answering their questions, meeting them, and providing document after document. Employment status enquiries usually last years, not months.
- The legal costs. You might not even end up with an HMRC liability but still need to hand over the keys to the vault just to pay for the legal representation. Gary Lineker can attest to that with his recent £400k legal bill for an IR35 challenge (that he won).
- Stress! Every time you open a new letter from HMRC about the enquiry your blood boils and you feel like banging your head against a brick wall. Whether this is answering the same question that has been asked many times before but in a slightly different way or them not listening to what you have previously said, it can test the patience of a saint. You could always call HMRC and spend your morning on hold.
- Reputational damage is something people may overlook but HMRC will usually want to speak with different people in the supply chain. It is easy for word to get out that your business is under HMRC enquiry and whilst you may not have done anything wrong, it is easy to assume that something is amiss – why else would they be looking.
- Your soul! It is very easy to come out the other side of an HMRC enquiry wondering why you bother and whether running the business is worth all the trouble and strive.
The above may seem a little extreme but as tax consultant’s who has defended many companies from HMRC, most of the above applies just to how we feel as our client’s adviser when dealing with HMRC, let alone how the client feels.
HMRC enquiries are a necessary evil, it is just a shame they are so unnecessarily time-consuming, painful, and costly. If HMRC were to ever improve on the long, drawn-out nature of enquiries (which would be very achievable if they had the desire), the associated cost and pain would diminish accordingly. But it only seems to get worse every year, so I won’t be holding my breath.
