HMRC has issued a warning to businesses (Spotlight 65) about unscrupulous tax agents who are targeting them with misleading strategies to claim Corporation Tax refunds. These agents encourage companies to falsely reduce their tax liabilities by claiming provisions related to potential General Data Protection Regulation (GDPR) fines or civil claims. Such claims not only contravene tax laws but also risk significant financial repercussions for businesses involved.
Understanding the Issue
These tax agents typically approach businesses with offers to reduce their Corporation Tax liability through the following methods:
- Claiming Deductions: They suggest that companies can claim a deduction for a GDPR provision in their tax return.
- Amending Previous Returns: They may advise businesses to amend prior tax returns to include these provisions, thereby reducing reported profits and generating undue tax refunds.
The agents often provide assessments of the risks associated with non-compliance and propose specific monetary amounts to set aside as provisions, all aimed at creating misleading tax deductions.
Potential Risks
Businesses should be wary of these practices. Not only are these claims incorrect according to Generally Accepted Accounting Principles (GAAP), but they also expose companies to risks of a tax enquiry by HMRC. If HMRC identifies these erroneous claims, they can demand repayment of taxes owed along with interest and penalties.
Additionally, some agents may charge exorbitant fees, sometimes exceeding 30% of the tax savings achieved. They may also vanish before HMRC can follow up on submitted claims, leaving businesses vulnerable to financial loss.
Compliance and Enforcement
HMRC is actively challenging these fraudulent claims and has extensive powers to investigate and penalise those who facilitate them. This includes issuing penalties, suspending agents from making claims on behalf of clients, and, when necessary, collaborating with law enforcement for prosecution.
What Businesses Should Do
If your business has made similar claims or you suspect you have been targeted by misleading agents, it’s crucial to act swiftly:
- Contact HMRC: Reach out to discuss withdrawing any incorrect claims and to correct your tax return.
- Seek Professional Advice: Consider obtaining independent tax advice to navigate this issue and ensure compliance.
Reporting Fraud
Businesses are also encouraged to report any suspicious tax schemes or agents to HMRC. Reports can be made anonymously, allowing businesses to contribute to the integrity of the tax system without revealing their identity.
By staying informed and cautious, business owners can protect their businesses from fraudulent claims and the associated risks.
This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.
We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.