Many companies and individuals receive tax investigation letters from HMRC. It maybe because you operating in a sector or area that HMRC deems as high risk or it maybe because HMRC have noticed an omission in data or a significant change in your income for example. It could also be a random check but only a very small percentage of HMRC are actually undertaken at random.
It is very important to understand if you are being criminally investigated by HMRC. If you suspect you are or shortly will be the subject to a criminal investigation please read out guide to HMRC criminal investigations and COP9.
Why should I take legal advice if I am being investigated?
Tax and Revenue loss is high on HMRC’s list of concerns, resulting in HMRC issuing large numbers of wrongdoing penalties. We strongly recommend that you seek legal advice as soon as you receive any correspondence that may lead to an assessment or penalty from HMRC, even if it is just a warning, as you may be able to prevent the matter from proceeding.
Altion Law is experienced at working with your accountant to best position you during an investigation. Whilst an accountant can help with collating information and ensuring the correct information is provided to HMRC, Altion Law are specialists at advising and representing parties who have received excise assessments and wrongdoing penalties from HMRC. We often work closely with clients and their accountant during complex tax investigations as part of a collaborative team.
Using Altion Law also enables you to stay in control - dealing with an HMRC enquiry can be very time intensive. Many businesses often ignore correspondence from HMRC, or at least leave it until the last minute to reply. However, this can be counter-productive, as the HMRC officer may assume that delays are indicative of underlying problems, leading to incorrect assumptions about the accuracy of the returned evidence or explanations.
Altion Law can be appointed as your Agent and will be the main point of contact with HMRC during investigations. We will co-ordinate information with you directly and respond to HMRC's correspondence based on your instructions. We will also remind you of information you had to provide to us to submit where you have not provided it in order to avoid missing deadline. If you will not be able to keep within HMRC’s deadline, we will contact the HMRC officer within the initial time limit to explain the reason for any delay, and to set a new timescale for replying where possible.
If the HMRC officer is slow to deal with correspondence, we are also not afraid to give them a gentle nudge.
How far back can HMRC check tax records?
HMRC could go back 20 years but in most cases it is usually 6 years.
I’ve received a letter from HMRC, what should I do now?
Read the letter very carefully and consider if you need to seek professional advice. Depending on the area of investigation HMRC may ask for significant amounts of evidence. The exact details of what will be required will vary from case to case but should be set out in the letter.
If you have ‘fee protection’ insurance, you should notify your insurer. This is insurance against the professional costs (e.g. tax advisers’ or investigation specialist fees) of dealing with an HMRC enquiry. Fee protection insurance will not prevent an HMRC enquiry but if an enquiry is opened, the taxpayer can be represented by a suitably experienced professional, like Altion Law, without the added worry of additional costs.
How long will a tax investigation take?
It again depends upon what HMRC are investigating. Some tax investigations can be dealt with and finished with one letter, other investigations can go on for months with HMRC asking for more and more information. Other aspects of HMRC may also be drawn into this and in certain sectors you may find HMRC Compliance checks for example are also carried out. Speaking to Altion Law at an early stage and providing a history of the issue should allow all parties to be aware of if the investigation is likely to expand into other areas.
Where will the meeting take place?
HMRC will often suggest a meeting in the early stages of a full tax return enquiry. Altion Law understands that often you may not wish HMRC to attend your home for a visit if that is your registered place of business and are happy for HMRC meetings to take place at our offices.
What will I be asked in a tax investigation?
Prior to any meeting, Altion Law will clarify who is attending and request the HMRC officer provide a detailed agenda of items that they wish to discuss. This will ensure the taxpayer can bring appropriate documentation if this hasn’t already been provided in advance and it also helps to reduce the number of unexpected questions.
The attendance of certain HMRC specialists at meeting can also give an indication as to the future direction of certain investigations. Our specialist tax solicitors are used to attending meetings and can also assist with handling any lines of enquiry by HMRC that are not linked to the immediate investigation.
Altion Law also takes full meeting notes in case of any disputes with those prepared by HMRC.
What if I don’t want to co-operate with a tax investigation?
Altion Law usually suggests that assisting with HMRC enquiries is generally a good idea. For example, if an error is found in the tax return which leads to HMRC imposing a penalty, the taxpayer’s cooperation may help to reduce the penalty charge. Assisting HMRC is also likely to result in the enquiry closing sooner rather than later. HMRC can issue a determination based on the evidence they have, if there is no co-operation, but this is always a last resort.
Am I liable to pay any tax found owed during a tax investigation?
If revenue is found to be due to HMRC, either the company (in some cases the Directors personally) or the individual will be liable for the tax and any related interest and penalties.
What penalties could I face in a tax investigation?
These will depend upon the particular matter HMRC are investigating. Penalties are published by HMRC and also take into consideration the tax payers behaviour.
The penalty will be significantly higher if the failure to disclose is considered deliberate, and if HMRC consider there was an attempt to conceal the lack of disclosure, they will increase further. An inadvertent mistake or voluntarily reported omission is likely to receive a lower penalty.
Could I go to prison for tax offences?
The above does not deal with HMRC’s criminal powers. Information on these can be found here.
If you believe you are the subject of an HMRC criminal investigation you should take urgent legal advice.