Bentleys Chartered Accountants of Bolton are alerting businesses to be aware of the warning signs that could trigger a tax investigation.

Responsibility for deciding which taxpayers should have their tax returns scrutinised rests with HM Revenue & Customs’ Risk Intelligence Assessment Teams (RIATs).

As might be expected, the RIATs are secretive about the way they operate and are even protected from providing details by the Freedom of Information Act.

John Shaw, partner from Bentleys said: “What we do know is that their reasons for initiating a tax enquiry are much the same as they were for local tax inspectors’ pre the RIAT regime.

They also draw on UK-wide information, which they use to compare factors within a target business, such as income, profit ratios and expenses, with those of similar businesses

We understand the banks are once again being asked to supply more information”.

While the RIATs remain tight-lipped about possible triggers, tax issues likely to arouse their interest include:

 more than one recent set of overdue accounts or tax returns
 significantly fluctuating income or expenses
 expenses that are obviously incorrect
 no adjustments for the private use element of expenses
 low income compared with likely outgoings.

Says John, “Some simple steps can help to reduce your risk of attracting the RIATs’ attention. Staying up to date with your tax returns is a wise move, even if you have to submit a form using estimated figures. Make sure that you tick the “estimated figures” box on the declaration page and submit the correct figure as soon as you can. Using a professional accountant with a good reputation will never do you any harm.”

It is also worth taking time to double-check your accounts, querying any figures that look out of place. If the figure is correct, remember to include an explanatory note with your tax return”.

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