Unfortunately HMRC can start an investigation into your tax affairs at anytime, we have seen them go back up to 10 years and heard of rare cases going back as far as 20 years (although its normally in the last few years and more than 6 years - because banks only hold statements for this long).
If your unlucky enough to receive a letter stating HMRC are checking your tax return, it can be a very tense and stressful time even if you have done nothing wrong.
HMRC investigations can occur for a variety of reasons:
Usually its a mistake that HMRC can see whilst looking through the information you have submitted to them in the past. The mistake can be of any type and scale of seriousness so it shouldn't be taken lightly. If you spot a mistake and tell HMRC about it, they will still have to open an investigation but it will be less severe.
Sometimes, a business is selected for investigation at random, HMRC will pick a few businesses in an area, maybe that are tax-fraud hotspots, just to make sure there is no tax evasion going on.
HMRC also has sophisticated software that will spot trends in your paperwork submitted and if certain figures flag up for investigation or are hugely different to the industry average, they will look into why this is.
And sometimes a related business is being investigated and this leads HMRC to think about you and your business also. ie when HMRC formally request information from third-parties such as banks and other businesses to investigate them they notice your business and then spot check into you as well.
The letter from HMRC will normally detail what direction the investigation will be taking. When you receive this letter, you should act fast because if you don't have all the required information ready when the investigation starts, you will be seen as unorganised and if you are uncooperative, they will be less lenient on you.
Read our previous blogs on HMRC Investigations for more information.
A Tax Accountant’s expertise and negotiation experience will help you greatly both financially and emotionally. We see families bear a huge amount of personal stress during investigations and it helps to shoulder some of that responsibility on a person who knows the system and can safeguard your interests. As always with a good tax accountants the fees that you may have to pay will be far outweighed by the amount of tax saved in direct negotiations with HMRC.
An experienced accountant will know what the next move by HMRC will be. And this helps protect you if there is a request for anything unusual. Also this helps prevents you from submitting too much information or making the investigation drag on longer than it should. The key is to co-operate with both your Tax Accountant and HMRC so the investigation is over quickly as possible.
By Anni Khan at Tax Affinity Accountants
Tax Affinity Accountants are experts in Tax and Accountancy. With offices in Surbiton and Worcester Park in the Royal borough of Kingston upon Thames they are considered to be experts in all types of Accounting and Tax issues. Helping and supporting businesses and individuals throughout the UK.
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