According to recent figures, 23 per cent of HMRC’s tax investigations take more than a year, and a small number – 3,800 out of 115,000 local tax office cases – were not resolved even after a period of three years.
The research was published by law firm RPC and it highlights how ongoing investigations, which are not resolved quickly, can have a massive financial impact on small firms, as well as their ability to function normally, because senior managers are required to invest their time in the process.
HMRC has recently upped the level of investigation it conducts into businesses’ financial affairs, as well a self-employed workers, in a bid to collect more tax revenue.
Due to the length of investigations, those affected are being put in a more uncertain position as to whether or not the tax authority will demand more tax from them than initially asked for.
Following the publication of the report, there have been more calls for HMRC to implement a system whereby there is a time limit for how long they are permitted to conduct their investigations, which would also cut costs for HMRC as well as those being investigated.
A spokesperson for HMRC said: “We aim to resolve issues as quickly as possible, so we can collect any money that is owed.
“But where a case is complex, we will take whatever time is necessary to investigate and resolve it.”
HMRC emphasised that it made a million tax investigations last year and that the majority of cases were resolved in a matter of weeks or months.