What you need to know about Tax Investigations

From time to time many businesses will face a routine tax audit, HMRC may launch a more serious investigation if they suspect that your tax returns are inaccurate.

What triggers a tax inspection?

7% of tax inspections are triggered at random. When completing tax returns it is very important for their to be no mistakes as ignorance is no defence, always ensure that they are accurate and on time. Fluctuations that seem unusual in turnover or profit may trigger an ‘aspect enquiry’ rather than a full blown investigation, due to tax returns being submitted online it allows HMRC to use their own software to analyse compare returns to other companies in the same sectors.

What happens in a tax inspection?

If you have a full inspection with your tax investigation, HMRC will request business records and then once they have reviewed they will come back with questions. If HMRC find that you have been deceitful in your returns they can investigate over 5 years back.

How likely is a tax audit or investigation?

When it comes to income tax or corporation tax routine tax audits are much less likely to have routine tax audits whereas VAT and PAYE routine tax audits are more likely. HMRC focus their tax investigations on areas where they have reason to believe that you are either making errors or deliberately concealing income.

Tax audits on average can be expected every 5 years or so while although only a few percent of income tax and corporation tax returns are investigated each year. However if HMRC suspects that tax is being underpaid they are likely to be a higher frequency of tax audit and them be more in depth.