Tax Enquiries

Tax enquiries, investigations and compliance checks are one and the same and cover the process of HMRC checking the accuracy of a tax return.

These most commonly start with a brown envelope being received in the post with a letter inside advising the recipient that an investigation of some form is being conducted. This could be related to an individual, company, partnership, trust etc. and it could cover one or more of the many taxes legislated in the UK.

Depending on the type of investigation, these letters can be intimidating, confusing and can come with ominous deadlines which, if missed, can put the recipient in a very difficult position. Therefore, it is vital that professional advice is sought as soon as the letters are received.

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Tax Enquiries - How can we help?

HMRC has a wealth of legal powers available for opening investigations, obtaining information, and enforcing a debt on a taxpayer. Ignoring HMRC, in the hope that the situation goes away, is never an advisable option, as HMRC will find a way to conduct its investigation, whether you decide to comply or not.

inTAX advisors are all ex-HMRC tax inspectors, with many years of experience in dealing with the full range of taxes and the types of investigations that HMRC conducts.

Investigations can be stressful, however with our experience of the inner workings of HMRC and knowledge of all taxes and types of investigations, we can greatly reduce this stress by guiding clients through the process, explaining the options available in layman’s terms and working with the client and HMRC to achieve the best possible resolution.

What you need to know

What is an HMRC investigation?

This is where HMRC has reason to believe that you have not declared the correct amount of tax for a given period and it has decided to investigate the matter. This may be because you have filed a tax return which HMRC believes does not include all of the income it should, or you have failed to file a tax return when you should have.

Just because HMRC has reason to investigate your tax affairs does not necessarily mean you have underdeclared your income. It is possible that the information HMRC has is incorrect, or that it has been interpreted incorrectly, in the absence of further context. However, it is your responsibility to provide evidence to satisfy HMRC that your tax return is correct, or that you were acting correctly in not filing a tax return.

What triggers an HMRC investigation?

HMRC receives a huge amount of financial information on its taxpayers every year from various third parties, including banks and financial institutions, local authorities, and overseas tax authorities. Investigations are usually triggered when this information contradicts information HMRC has received from you in a tax return.

For example, if you own a buy-to-let property, but decide not to declare the property income on a self-assessment tax return, it is likely that HMRC will identify this at some point. That is because HMRC holds information on buy-to-let properties in the UK, so it expects the owners of those properties to be declaring property income. The absence of property income on a tax return, or the absence of any tax return at all from these taxpayers, potentially contradicts the information that HMRC holds, and this could trigger an investigation.

How long do HMRC investigations take?

There are several factors affecting the length of an investigation, some of which are covered below:

- Scope: HMRC investigations can range from focussing on a specific aspect of a tax return, such as property income, to a cross-tax investigation into the entire tax return and all relevant taxes. The larger the scope, the longer the investigation is likely to last.

- Records: HMRC requires that taxpayers retain records to support their tax returns, and the better the records are, the easier it will be to evidence the correct tax position. If you do not keep sufficient records to support your tax return, then HMRC may need to obtain records from third parties, which can add significant delay to an investigation.

- Litigation: In most investigations, the taxpayer and HMRC will reach an agreement on the correct tax position without legal proceedings. However, where an agreement cannot be achieved, HMRC may elect that a court should decide on the correct tax position for an investigation.

The best way to ensure that your investigation takes the least time possible to reach a conclusion is to ensure that you are properly represented by specialists who know how to handle all aspects of an HMRC investigation, such as the team at inTAX.

How many years can HMRC investigate into?

If you have made an inaccuracy in your tax return as a result of deliberate behaviour, or have failed to notify HMRC of your chargeability to tax, HMRC can go back as far as 20 years. If neither of these applies then, depending on the facts of your case, HMRC may be able to go back as far as 4 to 6 years.

In certain scenarios HMRC is not able to investigate earlier years at all, so, in order to protect yourself, it is prudent to engage an experienced representative such as inTAX who can advise you on the scope of the investigation.

How we can assist you with a tax enquiry

Investigations can be stressful, however the inTAX team can greatly reduce this stress by guiding you through the process, explaining the options available in layman’s terms and working with you and HMRC to achieve the best possible resolution.

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