HMRC Tax Investigations – Everything you need to know
Posted: 19th January 2024
What are HMRC tax investigations and how do they work? An HMRC tax investigation can be launched when HMRC suspects that you or your business has unpaid tax liabilities. The investigation could relate to tax avoidance or tax evasion. A letter from HMRC can often cause panic and confusion, usually due to a lack of detail and unfamiliar vocabulary. So why not let us help? At NHD Tax Solutions we are experts in supporting our clients through these confusing and complex situations.
The different types of HMRC tax investigations
An HMRC tax investigation might commence in one of the following ways:
- Random check
- Targeted investigation
- Full-scale audit
Let’s break them down. A random tax check is what it says on the tin. It’s a random check on an individual or a business. From this check, HMRC may find a reason to launch a full investigation. A targeted investigation is when HMRC queries an element of your tax affairs. You might be contacted and requested to send further information to assist their investigation. A full-scale audit happens when HMRC wants to ensure your business tax records are accurate and you’ve made the correct payments, for example, it may be a full review of your Pay as You Earn or VAT position. When an audit takes place, a tax inspector usually visits your place of work and discusses the investigation with you.
Why might HMRC begin to investigate you?
There are many reasons why HMRC might launch an investigation. These include:
- A tip-off from an informant
- Entries on tax returns do not agree to data held by HMRC
- Mistakes on a tax return
- The figures reported are inconsistent with the industry standard
- The taxpayer has failed to respond to a prompt from HMRC encouraging the taxpayer to check their tax position
- HMRC are acting on information gathered during an investigation into another taxpayer’s tax affairs
Tax fraud is an illegal act which is investigated both civilly and criminally and the consequences of being found to have committed tax fraud differ depending on the investigation route. For example, if found guilty following a criminal investigation, the taxpayer could be sentenced to prison.
What we do at NHD Tax Solutions
At NHD Tax Solutions we specialise in supporting clients through these complex situations. From Code of Practice 8 and Code of Practice 9 to Appeals at the Tax Tribunal, we can work through any HMRC dispute on behalf of the taxpayer. We highly recommend contacting a tax advisor before responding to any communication from HMRC to ensure, for example, that HMRC has opened a valid enquiry or investigation and are entitled to request the information they have asked for.. As a team, we have decades of experience when it comes to tax investigations and we provide all the available options to you so you can make the best decision for you and your business.
To reduce the likelihood of an HMRC tax investigation, we recommend hiring a specialist to maintain your independent and business finances for you. By keeping accurate records and being transparent with your reporting, HMRC is more likely to trust the information you’re submitting. It also will give you peace of mind that you are doing things correctly! Let the experts help you and advise accordingly depending on the situation.
Whether you’ve received a letter from HMRC advising you of a potential tax investigation or you just want some advice in case you ever get the dreaded letter, get in touch with us. Having a trusted advisor from the outset of any HMRC investigation is invaluable. We provide personalised advice and support to all our taxpayers no matter what their situation may be. Give us a call today. We’d love to hear from you.
