How do I know if HMRC is investigating me?
Tax investigations are understandably unnerving due to the potentially severe penalties – but what are the signs that will help you to know if you are being investigated by HMRC? This guide explains the nuances of the HMRC process for investigating tax affairs and what to look out for if you suspect that you may be under investigation.
How to tell if HMRC is investigating you
If HMRC is investigating you formally, you will receive a letter explaining that they have started an official investigation and asking for additional information. You will not typically be notified when HMRC is looking into your tax affairs prior to this.
Sometimes the HMRC investigation process starts ‘softly,’ such as a general office compliance audit asking for more information about your latest tax return, or requesting information regarding a property transaction – but it is not uncommon for this to then expand into an investigation.
HMRC Tax Investigation Procedure
There are three ways in which HMRC investigates tax evasion:
- Full enquiry – A full enquiry tax investigation involves HMRC reviewing the entirety of your business records, often because they believe there is a significant risk of an error in your tax. If investigation limited companies, they can also look into the tax affairs of company directors as well as the affairs of the business itself.
- Aspect enquiry – HMRC will look at a particular aspect of your accounts such as inconsistencies in a section of a recent tax return.
- Random check – HMRC can carry out random checks at any time, regardless of the state of your accounts or whether you’ve triggered an alert.
During the HMRC tax investigation procedure, a team from HMRC will audit your accounts and ask you a number of questions. They can also ask to visit you at your home, business address or accountant’s office.
If HMRC thinks that criminal activity has occurred, such as VAT fraud or serious or extensive tax evasion, then it may open a criminal investigation, find out more on how far back HMRC can investigate. You will not know anything about this until you are arrested or receive an HMRC investigation asking for you to attend a voluntary interview under caution.
But sometimes, even when serious and deliberate tax evasion is identified, HMRC may choose to offer or accept to deal with it on a civil basis by entering into a Contractual Disclosure facility (CDF) under Code of Practice 9 (also known as a COP9 investigation). This is a structured and specialised process which allows HMRC to recover all outstanding tax plus interest and penalties from a person as long as full disclosure is made. If this is achieved, then HMRC will guarantee that the person will not be prosecuted for the issues disclosed.
So if you know of an irregularity in your tax affairs and you do not know how to resolve it, or you are worried that you may be investigated or find yourself the subject of a tax investigation or prosecution, then it is vital that you receive expert advice as to how best to navigate your way out of trouble. It is strongly recommended that you consult a specialist tax lawyer as soon as possible.
Do you require tax investigation assistance?
If you would like to find out how we can assist to answer your concerns and resolve your tax investigation problems, we are very keen to provide an initial, no-obligation consultation by telephone or email (whichever we think will be the quickest and clearest for you) to confirm – if we can help you (we usually can), how we can do this, and to give you a costs estimate so that you can decide if you wish to proceed. Get in touch with us today.
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