31 May marks the start of this ‘Single Compliance Process’ initiative which is intended to be a new way of carrying out compliance checks.

“These enquiries will be run with the express purpose of raising revenue for HMRC, and are likely to target business sectors which are known to be sources of ‘tax leakage’,” warned Richard Mannion, national tax director at Smith & Williamson the accountancy and investment management group.

He added: “Small businesses such as freelancing professionals, builders, plumbers, hairdressers, pubs and local shops are  most likely to be targeted by the tax authorities.  Officially, the new process will be looking at ‘risks and behaviours’ of business taxpayers.”

“Enquiries will follow four escalating stages beginning with straightforward queries normally dealt with by letter or phone. However, the enquiries will quickly become more searching if HMRC is not satisfied with the information provided. The second stage will include face-to-face meetings, the third will potentially explore tax avoidance and the fourth will be looking for evidence of tax evasion - which is a criminal offence.”

“Unusually, these enquiries will not be reserved for those businesses which have made errors, but rather, businesses will be selected from higher risk sectors where HMRC’s statistics indicate that something is not right.”

“Taxpayers should recognise that HMRC has a steadily increasing amount of information at their fingertips. Those whose affairs are seen to differ from the norm for their sector are likely to face questions. The introduction of IXBRL for companies will equip the tax authorities with even greater amounts of information.”