Alex Hartley


Is HMRC Doing Enough to Tackle Fraud? How Xero Can Help

HMRC form with cash
Xero Helps You Stay Tax Compliant

Introduction: The HMRC’s Role in the Accountancy Sector

Welcome to JacRox, a brand division of Jack Ross Chartered Accountants in Manchester. We are dedicated to offering expert Xero services to a wide variety of clients, from sole traders to large corporations. If you are in need of state-of-the-art cloud accounting software, use the contact form on the right and one of our JacRox team will be in touch to discuss next steps.

The HM Revenue and Customs (HMRC) is the UK’s tax authority, responsible for enforcing tax compliance and conducting HMRC investigations. In recent years, HMRC has faced increasing scrutiny over whether it is doing enough to tackle tax fraud. This article will delve into the effectiveness of HMRC’s efforts and discuss how using Xero can aid in compliance, reducing the likelihood of fraud.

HMRC’s Efforts: A Look at Enquiries and Investigations

HMRC uses a range of tools to ensure tax compliance, including enquiries, audits, and HMRC investigations. While it may seem that HMRC always prosecutes in cases of suspected tax fraud, the reality is more nuanced. HMRC may opt for a compliance check or a full-fledged tax investigation depending on the suspected discrepancy.

Is HMRC Doing Enough?

HMRC can go back several years to audit financial records, focusing on discrepancies in tax returns or unusual activity in bank accounts. However, critics argue that HMRC’s measures are not stringent enough to tackle tax evasion effectively.

HMRC and the ICAEW

The Institute of Chartered Accountants in England and Wales (ICAEW) often collaborates with HMRC to improve compliance and tackle tax evasion. This collaboration aims to bolster the accountancy sector’s role in maintaining a fair tax system.

The Role of Xero: Aiding in Compliance

Xero, a leading cloud-based accounting software, can assist taxpayers and accountants in maintaining accurate records, thereby reducing the risk of non-compliance or evasion.

Features That Help in Compliance

  • Making Tax Digital (MTD): Xero is compliant with HMRC’s MTD initiative, ensuring VAT-registered businesses to stay compliant.
  • Financial Planning: Xero’s real-time financial information can help in business planning and ensuring you pay the correct amount of tax.
  • Invoice and Receipt Tracking: Xero allows taxpayers to keep a record of income and expenses, ensuring an accurate self-assessment tax return.

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aj shelton 22/12/2021

Jack Ross has been my accountants since I set up my business in 2016. From the outset I was helped with advice, support and encouragement. I cannot commend them highly enough. Always on hand to answer any question and responsive to any changes in the economy which might concern their clients. I don’t have to worry about the financial side of my business as all of that is taken care of and dealt with by Umar and the brilliant team. If you are looking for a top class accountancy firm which maintains the personal touch they are for you!

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I can confidently recommend Jack Ross Accountants. They are continually improving their service, greatly benefiting our company as well as me personally. The team at Jack Ross have helped suggest and set up innovative accounting software, adding training and support. This alone has been a massive step towards having more control and understanding of our company finances.

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Paul Clark 29/09/2017

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Benjamin 22/02/2017

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Rob Cowan 22/02/2017

We have been looked after by jack Ross for a number of years. They have given us fantastic tax advise and helped our company grow from strength to strength. A & f

Fee Munshi 16/02/2017

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Holly Jones 14/02/2017

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Why Consult a Tax Professional?

If you receive a letter from HMRC regarding an enquiry into your tax affairs or are unsure about your tax liability, it is advisable to seek advice from chartered accountants or tax advisors. Get in touch with our JacRox Xero specialists using the form below.

Xero’s Robust Features for Financial Transparency

Detailed Bookkeeping Made Easy

One of the key areas where tax fraud or evasion can occur is in the bookkeeping process. HMRC relies heavily on financial records to determine if there is any form of evasion or fraud. Xero’s bookkeeping software is designed to simplify the complexity of tracking financial transactions.

Real-Time Access to Financial Information

Xero allows real-time access to your financial data, making it easier for both you and your accountant to review your tax affairs. With up-to-date information, you can ensure that your tax return accurately reflects your income and expenses for the tax year.

Data Security and Reliability

With the increasing number of organised crime and phishing attacks aimed at compromising taxpayer data, security is of the utmost importance. Xero offers robust security features that safeguard your financial data, further enhancing its reliability for both taxpayers and HMRC.

Ease of Collaboration

For businesses to ensure they are compliant, effective collaboration between the accountant and the business owner is crucial. Xero enables multiple users to access financial records, making it easier for accountants to perform thorough checks and verify the right amount of tax is paid.

Xero and HMRC’s Making Tax Digital (MTD)

Xero’s alignment with HMRC’s MTD initiative is not just about VAT compliance. It is about setting the foundation for transparent, real-time tax reporting, which is the future of tax affairs management. This alignment positions Xero as a future-ready solution for businesses looking to stay ahead of compliance requirements.

Summary: Combining HMRC’s and Xero’s Strengths

While HMRC has various methods to tackle tax fraud, using Xero can reduce the likelihood of becoming the subject of an HMRC investigation. With features that align with HMRC’s initiatives like MTD, Xero supports both individuals and SMEs in maintaining transparent and accurate financial records.

Final Thoughts

HMRC and Xero have distinct but complementary roles in promoting tax compliance. By taking advantage of Xero’s features, taxpayers can help HMRC in its ongoing efforts to tackle tax evasion and fraud.

Alex Hartley
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HMRC takes fraud very seriously and it is constantly looking for ways to improve the way they tackle and prevent it. They use a range of techniques, such as data analysis, intelligence-led investigations and behavioural insights, to detect fraud and bring criminals to justice.

HMRC does have the power to prosecute those convicted of tax evasion or other forms of tax fraud. However, it can be difficult for them to investigate more complex cases, so prosecution isn’t always the best course of action.

HMRC has a variety of tools that it uses to investigate potential instances of tax fraud. These include examining bank accounts, looking into any suspicious transactions, conducting interviews, reviewing documentation and conducting forensic investigations.

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