While most UK businesses and individuals will never face a full-blown HMRC investigation, the risk is real and, with HMRC’s ongoing crackdowns, ever-increasing. Even fully-compliant businesses can face investigation at some point, so assuming that HMRC may review your affairs, and preparing accordingly, is essential.
At Altion Law, our HMRC and Border Force lawyers specialise in advising clients facing HMRC investigations. Offering concise, pragmatic, and commercially-focused advice, our team will support you every step of the way, working hard to secure a favourable outcome with the minimum of disruption to your business.
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.
How likely is an HMRC Investigation?
HMRC does not provide individual taxpayers with their percentage ‘chance’ of an investigation, but several indicators provide a feel for how common checks are. For example, surveys of small to mid-sized businesses show that around 20% have faced an HMRC investigation of some description in the last five years.
HMRC’s compliance and fraud teams generate many billions of pounds for the revenue each year, so their incentive to continue and intensify their investigation activity is clear. Only a very small minority of cases begin as fully fledged ‘dawn raid’ style investigations; most start as routine enquiries or compliance checks into particular aspects of an individual return or in response to an identified area of risk.
What factors affect your chances of being investigated by HMRC?
Businesses are rarely selected at random to undergo an HMRC investigation; most are picked based on electronic risk profiling, data matching, and red flags. Examples of some factors that tend to increase your chances of facing an enquiry include the following:
- Discrepancies and anomalies.
Discrepancies between the figures entered on your tax return and the information held by third parties, such as your bank, can trigger an HMRC investigation. Other red flags include sudden spikes or drops in your income, unusually high expenses or repayment claims compared with your turnover or sector norms.
- Compliance history.
Persistent late or missing returns and payments can be viewed by HMRC as a marker of wider non-compliance. As a result, businesses with an inconsistent filing history can find themselves the subject of an investigation.
The affairs of businesses operating in cash-heavy sectors or those that HMRC has identified as being high-risk often face closer scrutiny by HMRC officers.
- Tip-offs.
HMRC’s tax evasion hotline receives thousands of reports each year, many of which are followed up by HMRC officials.
What practical steps can you take to reduce the chances of being investigated by HMRC?
While you cannot completely eliminate the chances of being investigated by HMRC, implementing effective systems and taking a proactive approach to your tax affairs can significantly reduce both the likelihood of an investigation and its impact if one arises.
Examples of some sensible risk-reducing steps include the following:
- Robust record-keeping.
By maintaining accurate records, you can be confident that the information you provide to HMRC is correct and comprehensively answer any queries raised. You may choose to use accounting software to assist you in record-keeping to ensure that everything is in one place and easily accessible.
- Preparing your returns carefully.
Ensuring that your tax return is completed carefully and accurately, or providing your accountant with the information they need to prepare your return is key to avoiding the types of anomalies that may give HMRC a reason to take a closer look at your affairs.
- Timely compliance.
Filing your returns and paying your tax on time are strong signals of general compliance and significantly reduce the chance of being profiled as high-risk by HMRC. If HMRC contacts you, answering the correspondence promptly and comprehensively can prevent routine enquiries escalating into full-blown investigations.
If you are aware of an issue that may cause problems with HMRC, it is a good idea to seek specialist advice from expert solicitors like ours as soon as possible. HMRC tends to treat taxpayers who make voluntary disclosures more favourably than those who wait to be contacted officially before addressing the matter.
How can we help?
Our HMRC and Border Force team supports clients through every stage of an inquiry and investigation, offering legal advice and strategic guidance from start to finish.
Generally speaking, the earlier you involve us in an investigation, the better. We will communicate with HMRC on your behalf, manage the scope of the enquiry to ensure that the officers do not exceed their powers, negotiate favourable settlement terms with HMRC, and go above and beyond to protect your business interests.
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.
