Tax Investigations: Frequent Asked Questions

How will I know if I am being investigated?

HMRC will not notify you as soon as it is looking into your affairs. But if it decides to officially commence their investigation, a letter from them will be sent to you asking for more information. They start with limited scope such as a local compliance audit asking for more details regarding your latest tax return or related to a property transaction, and usually investigations can be extended once issues arise.

Will I have to pay a penalty for underpaid tax?

The amount of tax that you have to pay depends on whether tax has in fact been underpaid. If it is proven to be true, HMRC will want it paid. In most cases, a penalty will be added as payable to the unpaid tax. Penalties can vary from 15% to as much as 200% of the tax due, and depends on the nature of the tax irregularity.

How long does the investigation take?

It will depend on the scope of HMRC’s investigation and the volume of paperwork involved. It could take few months or even last up to a year. It could delay their investigation by asking you additional information. Meanwhile, depending on the nature and circumstances related to your case, there are ways that an experienced barrister can do to reduce the amount of time it needs to take.

How far back can it investigate?

It really varies and depending on the facts being presented in the case. In some case, HMRC may want to go as far as 15-20 years to obtain relevant information and documents.

Aside from being time-consuming and may cost you a valuable amount, depending on how far back it investigates, this can also cause many problems. Therefore, it is important to know how to find solutions and avoid the unpleasant assessments.

If you are facing a tax investigation, or you are concerned that you may be investigated in the future, you may contact us today, for expert and confidential advice.