Few things are more distressing than being the subject of an HMRC investigation. Generally, an HMRC inquiry will begin without the taxpayer’s knowledge. HMRC employs advanced algorithms and systems that are capable of detecting red flags and irregularities, as well as strategies such as human intelligence collection.
HMRC will send a formal investigation letter in lieu of official notice. This letter will indicate if the investigation is being conducted on the basis of a suspect of fraud, as this sort of letter will be delivered by HMRC’s Fraud Investigation Service.
If the letter is not from the Fraud Inquiry Service, it will state whether the investigation is random, pertains to a specific area of your tax, or is a comprehensive tax investigation.
Whichever form of letter you get, you should seek expert guidance if you are worried. Legal and accounting counsel may be prudent.
Investigation of Taxation
HMRC investigations often begin with a request for papers, information, or responses to queries. In the majority of situations that do not settle promptly with the identification and resolution of a discrepancy, you should anticipate HMRC to wish to visit your company premises and may be required to present at an HMRC office. It is normal for investigations to begin with a very limited scope and time span, but the scope and time period of the inquiry may readily be expanded.
Intentional wrongdoing?
Unavoidably, business owners will be fearful and frightened about a tax probe. If you are aware of certain anomalies, you may be tempted to conceal evidence or find a means to prolong proceedings.
The above is never recommended and frequently constitutes a grave mistake of judgment. This may result in HMRC adopting a harder stance and prosecuting you on the basis of purposeful misconduct, perhaps amounting to fraud, which carries criminal as well as civil penalties.
Business owners are placed in an especially difficult situation when HMRC tells them that they wish to examine documents pertaining to a certain component of VAT, Corporation Tax, or CGT, but then seems to expand the inquiry. Should you object on the grounds that HMRC is looking for further grounds to penalize you, or should you just cooperate?
Situations such as the one above need professional assistance from advisers who are intimately familiar with how HMRC functions and how to safeguard your position while cooperating and avoiding aggravating your issue. Gannons has the experience you require, so please contact us.
How long do tax audits last?
HMRC investigations often last a few months, if not longer, and can cause substantial inconvenience and stress to your organization.
How far back in time can HMRC look?
While the majority of investigations begin with a single year or fewer, they can be extended over the last six years if HMRC believes poor accounting or up to twenty years if willful tax evasion is suspected.
How can you determine when an HMRC inquiry is complete?
The inquiry phase will conclude in one of the following three ways:
- You get a decision letter from HMRC including a civil law tax assessment to pay, as well as a possible penalty or confirming no action will be taken.
- You come to an agreement with HMRC.
- Where the Fraud team conducts the investigation, they will either charge you, take no action, or occasionally give you the opportunity of avoiding charges by agreeing to a Contractual Disclosure Facility (CDF). In this situation, you will have been required to make a complete disclosure and agree to pay any back taxes, interest, and penalties. In exchange, HMRC assures that you will not face prosecution for the offences mentioned.
Legal representation and assistance with an HMRC tax inquiry
Given the serious consequences and stress associated with being investigated by HMRC, if you find yourself in this scenario or wish to pre-empt an inquiry by dealing with a known past issue, our professional tax attorneys can assist. Kindly contact us for a private introductory consultation.
