You may have a very quick tax investigation question before visiting one of our comprehensive guides relative to your specific concerns.
Below you will find a list of frequently asked questions commonly posed by those under HMRC tax investigation.
Tax Investigation Selection
Why has my case been selected for tax investigation? What triggers an HMRC tax investigation?
Usually a tax investigation begins because HMRC have concerns regarding information that has been included on your tax return. This may be an unusually high expense or an omission of income. HMRC will usually compare accounting information that has been returned to them over a period of time. They may look for patterns or accounting adjustments such as balancing figures.
However a small percentage of tax investigation cases are selected at random. We have written a dedicated page on HMRC case selection which can found by clicking on the link below.
The tax investigation process
How will HMRC contact me? What should I do if I receive a tax investigation letter?
HMRC will always begin a tax investigation by writing to you. You should read the letter very carefully and immediately seek advice from a tax investigation specialist.
Do I have to respond to HMRC during a tax investigation? Can I appeal against the information or documents that they are requesting?
You should always respond to any contact from HMRC, particularly during a tax investigation. Your adviser will give you advice on the validity of information or documents being requested. It is possible to appeal against a notice if it is unreasonable.
How long will my tax investigation take?
This rather depends on the nature and complexity of HMRC concerns. Some investigations can be dealt with quickly with a couple of letters. Others can protract. Our average case time to settlement is just 6 months.
What powers do HMRC?
HMRC have a range of information powers available to them during a tax investigation. The can be enforced dependent upon the nature, size and gravity of your case. Fixed and daily penalties can be levied in cases of non compliance and estimated assessments, otherwise known as determinations, can be raised.
How far back can HMRC go during a tax investigation?
The common myth is 6 years because in most cases this is the period that HMRC use. However, strictly HMRC can go back 20 years, a right they reserve to use in more serious cases.
We have written a full guide to HMRC time limits here
Can I go to prison for tax offences?
HMRC adopt a selective prosecution policy and reserve criminal investigations for cases of the most serious, deliberate tax fraud.
However, the overwhelming majority of cases are settled using the department’s civil powers. If you would like to read more information on HMRC’s criminal prosecution policy then please take some time to read our recent blog.
If you would like to discuss any of our common tax investigation questions in more detail then please do give us a call on 0330 999 5000.