A Birmingham-based dental accounting specialist is warning that HMRC is to extend its tax investigations by probing into the social media activity of practices.
Robin Barnes, an accountant from JW Hinks and a member of the National Association of Dental Accountants and Lawyers (NASDAL), says the tax authority has recently introduced a new Single Compliance Process (SCP) which relates to tax checks on small and medium enterprises (SME), including dental practices.
The initiative was created in response to a government edict for HMRC to introduce quicker, more efficient checks which gets results – specifically an increase of £7 billion a year in tax gathering by 2014/15.
Piloted in 16 tax offices in May 2011 and extended by a year-and-a-half, SCP is now set to be rolled out across the country.
“Under SCP, HMRC will aim to determine the seriousness of a tax case against a dental practice– by a pre-tax check “risk” and “behaviour” review,” said Robin.
“This review will include scrutinising accounts for current and previous years for inconsistencies or inaccuracies, inspecting gross profit rate or hourly rate with comparable practices, issuing information notices for further data and more controversially generating a “personal lifestyle profile” on the practice owner, partners and directors, including analysis of social media updates.
“HMRC will try and use the behaviour and risk assessment to determine the level of tax evasion and assess if errors were made “despite reasonable care”, “carelessly”, or “deliberately.”
Once all the information is gathered, tax inspectors will then assign the case to one of four levels. Level One will mean no meeting is required to settle the issue, Level Two may require a meeting in person, Level Three will entail a further in-depth review and Level Four will see a detailed investigation into risk and behaviour outcomes due to suspicion of tax evasion.
“Businesses and dental practices under suspicion will receive letters announcing upcoming tax checks describing in more detail the information which is being sought, such as business expenses, to accelerate the enquiry,” added Robin.
“Unlike previously, those who attend meetings in person will not be given meeting notes, while there will also be inspections at practices, and principles will have to conform to officers’ requests for information.”
It is understood that cases thought to be at “higher risk” will receive unannounced visits and/or other “covert” activities.
“Dental practices whose records are spotless and up-to-date should have nothing to fear from SCP, however for some others it may be time to scrutinise their accounts and seek expert advice as soon as possible,” said Robin.