HMRC is targeting tax agents that are advising businesses to claim Corporation Tax refunds through incorrect provisions, linked to potential GDPR fines or civil claims.
The claims are designed to reduce business profits through the recognition of a provision and a corresponding expense, which mean the businesses pays less Corporation Tax than they should, or claiming Corporation Tax repayments they are not entitled to.
HMRC advises that provisions and related expenses should only be recognised in accordance with relevant Generally Accepted Accounting Practice (GAAP).
In a statement the tax authority said: “HMRC’s view is that these and similar claims are not in accordance with the law.” It added that it will challenge anyone making such claims, or encouraging or facilitating businesses to make false claims that reduce tax liability or seek a repayment.
HMRC explained that businesses are approached by a tax agent offering advice on how to reduce their Corporation Tax liability by:
• claiming a deduction for a GDPR provision in the company’s tax return.
• amending a previous tax return.
Some agents may charge a fee, sometimes exceeding 30% of any tax saving or repayment you receive, it said.
HMRC also warned that some agents may try to link the incorrect claims involving GDPR to the process for claiming Research & Development (R&D) tax credits, in order to falsely inflate the size of the R&D credit. If this happens, the GDPR element will be incorrect.
Businesses should be alert to this approach as it could lead to an error on which tax, interest, and penalties may be due, even if the R&D element is correct.
It added: “HMRC has a range of civil and criminal powers that we use to disrupt or investigate those that cause harm to the tax system. We proactively tackle tax agents who encourage or facilitate customers making false claims for expenses, rebates, or tax credits. This includes issuing penalties; suspending their ability to make claims on behalf of clients; and refusing to deal with an agent.
“When needed, we will work with the police and other government departments to support our investigations, which could lead to prosecutions.”
