A tax investigation occurs when HMRC decides to investigate your company's finances in order to guarantee that it is paying the correct amount of tax, both now and in the past.

It's a legal process that requires your cooperation, but it doesn't mean you've done anything illegal. A tax investigation should not be too onerous or time-consuming if you have strict accounting practices in place and a good accountant.

As a governing authority in the United Kingdom, HMRC has the legal jurisdiction to audit your finances, which means you must comply with their requirements. They may request to view a variety of documents, including VAT information, PAYE payment documentation, income tax records, and so on.

The conclusion of the tax investigation is determined by a variety of criteria, the most crucial of which is whether you are found guilty. Except in circumstances of proved fraud, criminal convictions are uncommon. If you commit a misdemeanour, you will almost always be penalised or asked to pay what you owe.

If you are told you are in the wrong and must pay, do it as soon as possible. You have 30 days to appeal the judgment if you don't agree with it.

PREPARATION FOR TAX INVESTIGATION:

If you are guilty of tax evasion, you should seek legal advice and admit to any wrongdoing right away, because HMRC audits are thorough and done by specialists. They'll find evidence of illicit activities.

For a variety of reasons, proper preparation for a tax investigation is beneficial. For starters, it can assist alleviate personal tension and prevent stress from piling up in the wake of your tax investigation. Tax investigations can also be made a lot easier, run a lot smoother, and terminate a lot faster if you prepare ahead of time. If you can provide HMRC with everything they need to accomplish their job, they will be able to do it more quickly.

Some tips that can help in tax investigation preparations are:

LOCATE YOUR EVIDENCE: Once you've been alerted that a tax inquiry is underway, begin gathering all of your financial papers so that HMRC may quickly access them. This includes invoices, receipts, transaction records, financial reports, and any other accounting information you have. If a tax inspector sees your records or evidence, it may cause them to believe you are hiding something. If you didn't keep records in the first place, you'll need to replace them with new ones, such as bank statements.

FULL DISCLOSURE: Notify HMRC if there is a problem with your tax return. Allowing them to understand why things went wrong in the first place and providing all necessary information will lessen your penalties and the possibility of a criminal inquiry.

PREPARING FOR MEETINGS: Prepare thoroughly and request a meeting agenda. Maintain your composure during the meeting and just state if you don't understand something. Check any meeting notes provided by the Revenue Department, as misunderstandings are common. Let HMRC know what changes are needed because they rely on these notes.

AUDIT YOUR ACCOUNTS: Examine your historical data to conduct an internal audit of your accounts, or hire an accountant to perform it for you. Cheylesmore Chartered accountants provide a personal tax investigation service. A self-audit before a tax investigation is designed to go over compliance checks and identify any potential issues before HMRC notices them. If your audit reveals any differences, you can submit them to HMRC as soon as possible to show transparency and avoid being held liable for innocent mistakes, as well as to refute any charges of tax fraud.

ALWAYS BE PREPARED: It's preferable to be proactive rather than reactive when it comes to tax investigations. If you're always prepared to confront a tax audit, you'll be in good shape. This entails effective tax planning, recognising your tax liability, and maintaining correct and up-to-date bookkeeping.

SEEKING HELP: We urge that you seek the advice of a seasoned professional. Having an expert tax advisor on your side who is familiar with tax investigation scenarios can help alleviate a lot of the tension.