Tax Investigation Specialists

HMRC usually initiates an investigation based on information it holds suggesting potential errors with your tax affairs, although it might not acknowledge this at the beginning. 

Every year, it receives access to more data through various sources, and utilises artificial intelligence that scours the mountains of data in its system to identify people or businesses that match a particular risk profile. 

That said, other things could lead to HMRC sending you a tax investigation letter, including, but not limited to:

• A tip-off from a business associate, disgruntled employees, or neighbours.
• Your tax filings indicate a sudden, dramatic increase in costs.
• Your business seems to lose money every year.
• Mistakes on your tax filings.
• Your standard of living appears incommensurate with your reported income.
• Your company incurs business costs out of step with others in your industry.
• Your business operates large cash transactions.
• You routinely submit your self-assessment late.
• You are randomly selected by the HMRC system for an audit.
• Your income numbers fluctuate wildly from one year to the next.

The potential outcomes of a tax investigation fall into three general categories, although it’s important to note that the details of each outcome will vary significantly from case to case. Those potential outcomes are:

• Amendments to a return: In straightforward cases necessitating minor adjustments, HMRC will amend your previously submitted returns. Consequently, you will be required to settle the outstanding tax, along with any accrued interest and potential penalties.
• Closure notices: When more than a simple amendment is necessary, HMRC will issue a closure notice at the investigation's conclusion. This document outlines the enquiry's outcome, detailing additional tax, interest, and penalties owed for each tax year. Moreover, the closure notice covers the reasons behind HMRC's decision.
• Raising of assessments: In intricate cases spanning multiple tax years, HMRC will issue assessments indicating the additional tax deemed payable, along with associated penalties and interest.

Unless you are subject to a of COP9 investigation, you're not obliged to attend. However, not attending - or not sending a representative – may leave a bad taste in the mouth of HMRC investigators who may take a more aggressively adversarial approach to your case as a result. If, however, you have enlisted the help of the tax investigation specialists at Buzzacott one of our tax investigation experts will handle all direct contact with HMRC, including attending any meetings.

The best course of action is to hire our tax investigation specialists as soon as you receive the notice of investigation from HMRC to resolve matters. 

A voluntary disclosure to HMRC is the best way of protecting yourself from punitive action. Keep in mind that HMRC offers immunity from criminal prosecution in certain cases in exchange for full disclosure.

In general terms, HMRC can go back and investigate your accounts and tax filings for the past four years. If HMRC investigators determine you have acted carelessly in dealing with your tax affairs, it may look back six years. And if HMRC determines you have deliberately avoided paying taxes they may examine your records as far back as 20 years.