HMRC can look into your tax affairs at any time to check that you’re complying with your obligations and paying the right amount. Sometimes, an HMRC investigation might be a straightforward compliance check. Other times, HMRC might suspect the taxpayer of serious wrongdoing or tax evasion.

 

For a confidential free discussion, call us today on 01908 414990,  alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.

 

If you are notified of an upcoming HMRC tax investigation, our specialist HMRC team of solicitors and barristers are on hand to help. With extensive experience in assisting businesses of all types and sizes in navigating HMRC investigations, you can be confident of receiving the very best legal and commercial advice.

 

What triggers an HMRC Tax Investigation?

The potential reasons for an HMRC investigation are wide and varied. Some of the most common include the following:

  • You operate in a high-risk industry.

HMRC considers some industries, such as those that handle large amounts of cash transactions, particularly ‘high-risk’ for tax accounting anomalies. HMRC may select your business for an investigation because you operate in one of these industries.

  • Someone has alerted HMRC to potential tax evasion.

 If HMRC receives a tip-off about potentially fraudulent activities, it may launch an HMRC tax investigation into your affairs.

  • You consistently file your tax returns late.

 Regularly failing to submit your tax returns on time can put you on HMRC’s radar and may lead to an HMRC tax investigation.

  • Your tax return contains anomalies.

HMRC identifying anomalies in your tax return can prompt its officers to look more closely into your business affairs.

  • Your tax return appears to be at odds with industry norms.

A taxpayer who reports income significantly lower than comparable businesses operating in the same industry can be a red flag for HMRC and trigger an investigation.

  • A connected business has a history of tax avoidance.

If your business is associated with another business that has been found to engage in tax avoidance, HMRC may look more closely into your affairs.

  • Unexplained fluctuations in your tax reporting.

A tax return that differs significantly from previous returns may cause alarm bells to ring at HMRC.

 

How does HMRC Identify Potential Tax avoidance?

HMRC has several tools at its disposal when looking into a taxpayer’s affairs. One of the most potent is a powerful software programme known as ‘Connect’. Connect reportedly contains a staggering amount of information about taxpayers, which HMRC reviews for suspicious activity. If Connect raises any red flags, HMRC may initiate a tax investigation.

HMRC has never divulged where the data held on Connect originates from, but it is thought to include information gleaned from sources such as bank accounts, credit cards, social media, and apps such as Airbnb.

 

What can you expect during an HMRC Tax Investigation?

HMRC usually informs you in writing that you have been selected for an HMRC tax investigation. Sometimes, HMRC may turn up unannounced to undertake the investigation, but this is rare.

HMRC may inform you that they wish to attend your home, business premises, or your advisor’s office, to meet with you. You are entitled to professional representation at this meeting. Our HMRC solicitors are well versed in the intricacies of HMRC tax investigations and will support you through the process, ensuring the meeting proceeds smoothly, and the officers do not act outside their powers.

The level of scrutiny your records will be subjected to depends on the type of investigation and the reasons behind it. HMRC may simply wish to clarify one particular aspect of your tax return and ensure that everything is in order. Conversely, it may suspect you of serious tax evasion and fraud, in which case its investigation will be far more thorough.

If HMRC intends to undertake a full investigation, it will require sight of various financial records. These might include your business’s bank statements, invoices, expense receipts, and VAT records.

 

What happens after an HMRC Tax Investigation?

Once HMRC has completed its investigation, it will inform you of the outcome. If you have paid too much tax, HMRC will refund the overpayment, potentially with interest. If you have underpaid tax, you will be required to pay the outstanding tax, usually with interest. Sometimes, HMRC may impose an additional penalty on top of the unpaid tax. Penalties are more likely in certain situations, such as if you did not cooperate with the HMRC tax investigation or deliberately withheld information from HMRC officers.

In severe cases, HMRC may deploy its criminal investigation powers. Criminal investigations can lead to criminal prosecutions, which can, in turn, result in significant fines and imprisonment. Accordingly, if you are the subject of an HMRC criminal investigation, expert legal support from specialist HMRC lawyers like ours is essential.

 

For a confidential free discussion, call us today on 01908 414990,  alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.