HMRC Tax Investigations

What is a HMRC Tax Investigation?

HMRC obtains the right to be able to look into your business affairs at any point to ensure that the correct amount of tax is being paid, if your business is under investigation from HMRC you will receive an official letter or phone call explaining what they require. They may ask about the following:

-          Tax that you have paid

-          Accounts submitted and the calculations in relation to this

-          Self Assessment Tax Return (for any given year)

-          PAYE records

-          VAT Returns (if registered)

-          Company Tax returns

What are the different types of tax investigations?

Full Enquiry

A full enquiry entails a review of your entire business records due to HMRC suspecting there is a significant risk of error in the tax you have paid. If it’s a full enquiry into a limited company HMRC may also investigate into the tax affairs of the company directors as well as the business.

Aspect Enquiry

An Aspect Enquiry is when HMRC will look into an aspect of your company such as a recent VAT Return looking for inconsistencies.

Random Check

A random check can happen at any point, this isn’t triggered by any alerts by HMRC therefore it’s nothing to worry about.

Which does a tax investigation procedure involve?

When undergoing a tax investigation with HMRC a member of their team will audit your accounts and ask you questions regarding it. They could ask to arrange a meeting in person at your house, accountants office or your business address.

Which taxes can be investigated?

HMRC holds the rights to investigate into any of the following;

-          Corporation Tax

-          VAT

-          Capital Gains Tax

-          IR35

-          Construction Industry Scheme

What can trigger a tax investigation?

Any activity that is unusual in your accounts or tax records could flag you up for an investigation. Most of the investigations are triggered by a team within HMRC called HMRC’s Central Risk Team, they use advanced software’s to spot unusual activity within accounts in certain industries. Other triggers may include:

-          Someone may alert HMRC about there being unusual activity in your accounts

-          High frequency of late returns

-          Industry that your business is in could be considered high risk

-          Significant inconsistencies between tax returns

-          Accounts being very different to the norm of the industry you’re in