HMRC Tax Investigations: The Basic Facts

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HMRC Tax Investigations The Basic Facts
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• While random HMRC Tax investigations used to be a
  rare occurrence, the tax authorities now have a
  wide range of sophisticated and effective tools
  at their disposal, making consultants who engage
  in risky behavior the most likely targets.
• HMRC investigations are aimed at determining
  whether accurate information has been provided,
  as well as whether accurate tax amounts have been
  paid.

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• HMRC Tax Investigations Advice
• Tax audits and inspections can be complicated and
  stressful, so seek professional advice as soon as
  a tax investigation begins unless you are certain
  of your position.
• Investigations frequently result in unexpectedly
  large tax bills, insolvency, and the need for a
  time-to-pay arrangement, a company voluntary
  arrangement, or even a creditors voluntary
  liquidation.

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• Who is Likely to Face an HMRC Tax Investigation?
• Tax inspections are most common in businesses
  that are registered for VAT or PAYE, two areas
  where mistakes are common.
• Routine tax audits focusing on income tax or
  corporation tax are much less likely, unless HMRC
  has reason to believe you are concealing income
  or filing returns incorrectly. Be aware that
  deliberate concealment or even fraudulent
  activity can result in criminal investigations.
  And ignorance is rarely a sufficient defense.

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• If any of the following apply to you are far more
  likely to be the subject of a tax investigation
• You make mistakes on your tax returns that need
  to be corrected
• You file returns or pay tax late
• Your expenses are unusually high for your
  industry
• Your tax returns are inconsistent with your
  standard of living
• You have property income
• You work in a high-risk industry

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• Types of Tax Investigations
• Aspect, full, and random investigations are the
  three types of tax investigations.
• Aspect enquiries will focus on one or more areas
  of your tax information full enquiries will
  involve an inspection of your entire tax return
  and random enquiries are a tool to evaluate tax
  returns in areas that are deemed to be high risk.
  All of them can be very serious.

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• The HMRC Tax Investigation Process Explained
• HMRC will write or call you to let you know about
  the investigation and what they want to look
  into. A tax investigation will begin with a
  letter requesting information (referred to as an
  information notice). During a tax audit, the
  inspector will usually want to meet with you and
  look over your tax records. If you are the
  subject of a tax investigation, the letter will
  specify which parts of your tax return HMRC wants
  to examine.

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• This might be
• Your self-assessment tax return
• Your business tax return
• PAYE records and returns
• Your financial statements and tax calculations
• If you employ an accountant, HMRC will almost
  always contact them if they have the authority to
  do so. If you do not respond to a request for
  information or refuse a visit, you may be subject
  to a penalty.

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