Avoiding online tax scams: What should SMEs look for?
Online tax scams are a real danger for small business owners. Malicious actors target your business’ finances in many different ways; it is of vital importance that you remain vigilant in the face of cyber attacks around your tax payments.
According to official Government statistics, business fraud totals £137bn a year. Tax fraud accounts for £15.4bn of this amount. This figure is rising, with the added financial pressure of the Covid-19 pandemic and now the cost of living crisis seeing tax fraud rise by 19.3% over the past 24 months.
In this article, we’ll answer the following questions:
- What are the most common tax fraud schemes attacking small businesses in the UK today? (And how to spot them)
- What can businesses do to protect themselves from tax scams?
- What are the signs you have been scammed, and what should you do next?
What are the most common tax fraud schemes attacking small businesses in the UK today? (And how to spot them)
It is important to differentiate between the types of scams, and the tactics that are employed to execute them. The most common schemes can be broken down into the following categories:
Fake audits and unpaid taxes: An actor appearing to be from HMRC will get in touch claiming that your business is due for an audit, or they will suggest you have either not paid, or underpaid, your tax bill for the previous accounting period. Once you have been deemed ‘compliant’ by the scammer, they will then request payment.
Fake rebates or refunds: If your business is expecting a rebate from HMRC, scammers will get in touch with a phishing link, through which you can ‘claim’ your refund from the revenue services. This link is designed to collect your details, normally through a form, which is then used to steal your identity, and claim your businesses’ refund.
Incorrect refunds: This scam is less common. Scammers infiltrate tax systems, and produce an incorrect refund on your behalf. Once they have sent that out, they then contact the business, pretending to be the local tax office, requesting these funds then be returned. This is a sophisticated attack, as it often presents details that only you and HMRC should have on record.
The tactics used to execute these scams are generally as follows. Here’s how you can spot these malicious attempts at stealing your money:
- Email phishing links: Scammers will send you emails claiming to be from HMRC. Generally, these will include a phishing link to a form, from which your details can be scraped, or be offered up voluntarily. The most important thing to look out for is the email address. Fraudsters will attempt to mimic official government domains. Official government emails come from gov.uk addresses. HMRC never sends links asking businesses to offer up information in this way.
- SMS, text, Whatsapp messages: As above, scammers will send a link via a messaging service. Again, HMRC will never ask for you to offer up your information via a text message.
- Dishonest accountants: Unfortunately, there are malicious parties pretending to be above board accountants. They often don’t ask for proper documentation, receipts or invoices, and can make fraudulent returns and claims in your name. A proper accountant should ask for all of the information regarding your income and outgoing over the past year (for a full breakdown of what you should give your accountant, check out this article). A common tactic is to ask you to sign a blank paper return, from which they will then file erroneous information.
Fake charities: Donations to not-for-profit organisations are deductible, and can therefore reduce your bill at the end of the year. Scammers impersonate charities, pocketing money you thought was going to a good cause. Always ask for proof the charity is registered before making donations.
What can businesses do to protect themselves from tax scams?
Now we know what to look for, here are some general tips for making sure your business isn’t taken advantage of:
- Know how HMRC operates: It is very rare for HMRC to contact you via email, phone or SMS. They will never ask for information outside of the secure structure of its online portal, or unofficial forms. Double and triple check all contact from the revenue services to make sure they are legitimate.
- Pay on time: Delaying payment of your taxes can result in drops in vigilance. If you are right up against a deadline, a quick fix becomes more appealing.
- Never sign blank documents: Blank forms are a blank cheque. You’re giving malicious actors free reign to make fraudulent claims in your name.
- Verify all third parties that have an effect on your tax: This applies to accountants and bookkeepers that are handling your finances, but also the charities and other non-profit organisations you make donations to. Make sure these people are accredited, and on the up-and-up.
- Stick to one method of payment: If you prefer to do business by cheque, or BACS, stick to it. Don’t be cajoled into payments over the phone if that’s not how you like to do business.
Consult your accountant: Properly trained tax experts will be like a bloodhound for these scams. They can sniff them out a mile off. Once you’ve found a trusted accountant or bookkeeper, they should be the only other party with access to your records.
What are the signs you’ve been scammed, and what should you do next?
The typical signs you’ve been scammed are:
- You are asked to pay additional tax, or you receive notification of an unexpected rebate
- HMRC holds records of income from businesses you haven’t worked for in the past 12 months
- More than one return exists under your National Insurance number
If you have been a victim of fraud, or suspect you have been a victim, report the crime to Action Fraud at 0300 123 2040 or use its online fraud reporting tool.
To report suspected phishing campaigns, forward the email in question to: firstname.lastname@example.org.
If you want a trusted accountant partner to check in with, or for more advice on how to keep your business protected, get in touch with Pennyhills today.