HMRC can conduct tax compliance checks on all UK taxpayers, including individuals and businesses. You may be selected for an HMRC investigation at random. Or, HMRC may have reason to suspect a problem, such as anomalies in your tax returns.
If, after a compliance check, HMRC accuses you of deliberate dishonesty or fraud, we strongly recommend that you get expert legal advice from our solicitors. Contact us at Altion Law for a confidential discussion.
HMRC Tax Investigation
HMRC is tasked with ensuring that individuals and businesses pay the right amount of tax in the UK. It carries out compliance checks on a regular basis to make sure a tax payer has not either underpaid or overpaid. HMRC can investigate all types of tax, including income tax, VAT, capital gains tax, corporation tax and landfill tax (amongst others).
Are there time limits for HMRC Investigations?
HMRC officers have 12 months to open an enquiry, starting from the date the return was filed. An investigation can be opened after this deadline, but only if HMRC officers cannot reasonably have been expected to know about the relevant loss of tax at the time (for example, because the taxpayer concealed certain details).
How will HMRC tell me about a Tax Investigation?
HMRC will contact either you or your accountant by phone or letter. You’ll be told that HMRC intends to investigate your tax affairs. HMRC will specify what they want to check. Officers may want to look at all your records (known as a full enquiry). Or, officers may just want to look at a specific area, such as your VAT returns (known as an aspect enquiry).
What happens when HMRC conducts a Tax Compliance check?
HMRC will either visit your home/business, or you will be asked to attend an HMRC office in person. Your accountant or advisor can accompany you. You’ll be asked to provide access to certain information, such as your accounts, PAYE records (if you have employees), tax returns and calculations. This meeting can take a matter of hours, or it may go on for days.
What are the possible outcomes of an HMRC Investigation?
HMRC will consider all the information and decide whether any money is owing. If you have paid too much tax, then you will get a rebate. If you haven’t paid enough, you will be asked to pay the shortfall plus interest within 30 days. HMRC may also issue a penalty if it feels that wrongdoing has been committed. You can appeal the penalty if you disagree with it.
What if Tax fraud or Tax evasion is suspected?
If HMRC’s tax compliance check uncovers suspicions of fraud or tax evasion, the investigation will be escalated. Ordinarily, HMRC sends the taxpayer a COP9 letter of investigation. This invites you to admit to the fraud or tax evasion. In return for your co-operation, HMRC will issue a lower penalty and ensure you are immune from criminal prosecution.
Does HMRC pursue Criminal Investigations?
If you refuse to co-operate with HMRC, or HMRC believes the fraud/tax evasion to be serious, then it may choose to conduct a criminal investigation. This is when HMRC gathers evidence to support a future criminal prosecution. The Crown Prosecution Service (CPS) ultimately decides whether to take the matter to court.
How far back can HMRC go during a Tax Investigation?
During an ordinary compliance check, HMRC can look at four years’ worth of records. However, if HMRC can prove that tax was lost due to the taxpayer’s careless behaviour, then it can examine six years’ worth of records (except where VAT is concerned, which remains at four years). Where deliberate dishonesty is suspected, HMRC can ask for 20 years’ worth of records.
What triggers an HMRC Investigation?
If you have received notice of an HMRC tax compliance check, you might wonder what has triggered this investigation in the first place. It may be completely random. If you are confident that your taxes are 100% in order, then this is likely the case. However, an HMRC investigation may also arise due to:
- A tip-off from a member of the public
- Anomalies or errors in your tax returns
- Inconsistencies in your tax returns
- Missed or late tax payments
- Concerns that your industry is known for fraud and tax evasion
How long does an HMRC Investigation last?
The initial visit from an HMRC officer can last for a number of hours, or a number of days. It all depends on the complexity of your financial affairs. The rest of the investigation can take weeks, months or even years. Again, it all depends on the circumstances. HMRC investigations are particularly long where tax evasion or fraud is suspected.
Are you facing an HMRC Investigation?
If HMRC has accused you of wrongdoing, please contact us at Altion Law. We specialise in HMRC investigations, compliance and regulatory matters, and director disqualification. Our solicitors can represent you throughout an HMRC investigation to get the best possible outcome. We can also help you appeal wrongdoing penalties.
If you would like to have a free confidential discussion with a member of our team, please either make a Free Request For Call Back or call us directly on 01908 414990 and we will be pleased to help you.