Mark Taylor, Head of our award-winning Tax Investigations and Dispute Resolution team, answers the top questions often asked about tax investigations, and what you should do to successfully settle your case with HMRC.

Why am I being investigated?

HMRC typically opens an enquiry because it has information that suggests there is something wrong with your tax affairs, although they may not admit this from the outset.

Each year, HMRC receives access to more data through various sources including but not limited to Companies House, Land Registry, and onshore and offshore banks. Very rarely, it is because your case has been selected at random.

This data is collected and inputted into HMRC’s system 'Connect’, which is a powerful Artificial Intelligence system that assists in identifying tax investigation risks and targets. This machine learning tool, which gets more capable every year, coupled with highly trained staff, to strengthen HMRC’s ability to uncover potential fraud at a granular level. However, various other factors may prompt HMRC to send a tax investigation letter. As such you may also find yourself the subject of HMRC tax investigation in the event:

• A business associate, disgruntled employee, spouse, or neighbour provides HMRC with an unsolicited tip.

• Investigators notice your lifestyle does not match your claims of a modest income.

• HMRC detects an evasive or hostile tone during what should be a routine interaction.

• You claim deductions that are not typical for the industry you’re in.

• Your self-assessments arrive late every year.

• Your tax filings indicate large cash deposits being made by your business.

What should I do if I'm due to be investigated?

We strongly recommend you cooperate with HMRC, and appoint a specialist to represent you.

Specialist advisers, such as ourselves, can guide you around potential pitfalls to ensure you are best protected. They will also allow you to get ahead of any accusations by HMRC and should reduce the overall cost of any investigation.

We provide a discreet and comprehensive service that is tailored to meet your unique needs and protect your interests. We will carry out a comprehensive review of your tax affairs to ensure we have a full understanding of the issues and risks you are facing, prepare a strategy going forward to minimise your potential exposure to unnecessary tax, interest and penalties, present to HMRC should a disclosure be necessary, and aim to fast track your investigation to resolution at minimum cost and disruption to you.

How long will a tax investigation take?

The length of an investigation varies on a case by case basis, ranging from one letter to several months, and in more technical cases, even years. Appointing a specialist to represent you will speed up the process.

How far back can HMRC go?

In most cases, six years for carelessness, or for errors that have occurred despite reasonable care, four years. However, if HMRC suspect you have deliberately avoided paying taxes, HMRC may examine your tax filings going back as far as 20 years.

What are the odds I will end up in prison?

There are four potential outcomes of being investigated by HMRC, and while prison time is one, only a relatively small number of people end up in prison as a result of HMRC tax investigation. The four potential investigation outcomes are:

• No further action is taken: You have demonstrated that no tax, interest, or penalties is owed. Using a tax investigation specialist will maximise the likelihood of this outcome.

• The person or business is assessed additional tax: When this happens, HMRC assess the amount due, add penalties and interest, and present the party being investigated with a bill. A tax investigation expert can help in agreeing a time to pay arrangement with HMRC to make repaying this easier or help you dispute the penalties given.

• A settlement is reached: It’s possible, and not all that uncommon, that HMRC may offer the person or business a settlement whereby it will accept less than the amount that was originally assessed. It should be noted that you have a better chance of reaching a settlement that benefits you if you have a tax investigation specialist in your corner.

• Criminal charges and prison: This outcome is fairly uncommon but is possible. Engaging specialist advisers is the first step to ensure criminal prosecution, and the threat of prison time, is avoided.

Could I go to prison?

HMRC is under pressure to increase the number of criminal prosecutions it undertakes and the use of its ‘naming and shaming’ powers. Tax fraud is a serious crime and does carry the potential for a custodial sentence. However, most of HMRC's investigations are undertaken under their civil powers, which means the decision has already been taken to work your case on a civil basis, with a view to a potential financial settlement.

Engaging specialist advisers will ensure criminal prosecution, and the threat of prison time, is avoided.

Am I required to attend meetings with HMRC?

If you’re the subject of a code of practice 9 investigation and have accepted HMRC's CDF offer, then you must personally meet with HMRC when requested. Otherwise, your presence is not mandatory. Meetings with HMRC can become confrontational and extremely stressful. By choosing our Tax Investigations and Dispute Resolution team, we’ll work with you to decide if your attendance at a meeting with HMRC is necessary and in your best interests. If required, you'll be prepared on how best to handle the meeting and we will be in attendance with you. Should you not be required to attend nor is attendance in your best interests, we will attend and make representations on your behalf.

Can anyone be investigated?

Anyone can be investigated. It’s a common misconception that HMRC tax investigations only happen to high profile businesses or celebrities. In fact, HMRC tax investigations are initiated every day against individuals from every income group and businesses large and small. If you receive notice that HMRC has opened an investigation into your filings, we strongly recommend you get in touch and enlist the help of our professional tax investigation team. We will make sure your case is handled fairly, discreetly and minimise any potential penalties.

Get help today

Call us today on +44 (0)20 7710 3389 or fill in the form below and a member of our team will be in touch. All communications are in the strictest confidence.