Tax Investigations

A tax investigation can be a very daunting and stressful experience. It can arise due to a specific reason or as a random enquiry through no fault of yourself. Whatever the reason, we can fight your case and have extensive experience when it comes to resolving tax enquires, disputes and investigations by HMRC. We make sure that the taxman keeps to their own internal guidelines and doesn’t over step the mark.

We know the triggers that often give rise to enquiries if not fully explained to HMRC when submitting Returns to them. At Wiseborne, all of your tax returns submitted to the taxman will always be undertaken by the partner, which substantially reduces the risk of errors and odds of being investigated in the first place.

What can trigger an investigation?

HMRC enquiries can arise when your tax return becomes flagged up by HMRC, for example, when a VAT refund claim is made, or when a business with a large turnover declares a very small amount of tax. Our experience has taught us that other reasons that could lead to becoming investigated are:

HMRC receives a tip-off
You work in a high-risk industry, for example one that regularly receives cash payments
You have a large drop in income, increase in costs or there are inconsistencies between different returns
Your costs are above the industry norm
You file your returns consistently late
Your tax returns are inconsistent with your standard of living
You are in a sector that HMRC has decided to target.
A random business check. You may not have actually done anything wrong but your business is selected completely at random for a compliance check.

What types of investigation are there?

There are three types of investigations; full, aspect and random.

With an aspect enquiry, HMRC will want to check a particular aspect of your tax return. For example, HMRC may have information about the bank interest you received from the building society which does not match what’s on your tax return. HMRC will ask for more information specifically relating to just the bank interest that you received.

With a full enquiry HMRC will want to check the whole tax return. HMRC will ask for information relating to the whole tax return. For example, not just the bank interest, but also any other income you may have also received in the year i.e. rental income, self employed income and etc.

Lastly, there’s the random enquiry where HMRC will pick a selection of businesses to investigate completely at random.

Penalties

There are various penalties HMRC can seek to impose following an enquiry for undeclared income. As well as having to pay the tax, you can find them seeking penalties up to an amount equal to the tax, so doubling your tax bill. Interest on the late payment of the tax is also part of the arrangement – not a pleasant experience. We can help you minimise these penalties.

How much is it?

The industry norm is to charge a yearly fee, as insurance, so that the firm can represent you should a HMRC enquiry/investigation ever occur. At Wiseborne, we do not charge these protection fees as we do not need use account managers to allocate jobs across 3-5 other people that change every year across all over your jobs, which is commonly the case. The actual partner will be undertaking your returns and nobody else, and we will always try and resolve any HMRC enquiries free of charge should they arise. Furthermore, we do not want to charge you for something that you will most likely never need.

If you are not an existing client and would like to use us as one-off service then we can offer this. Please free to contact us and we’ll be happy to advise you further.

Frequently asked questions

Why are HMRC picking on me? It may just be a random compliance check, or it may be down to something that looks unusual for which there’s a perfectly good explanation.

Can HMRC look at my bank accounts? Yes. HMRC has the power to look at your bank account without your permission to check to see if you are paying the right amount of tax.

How long do investigations last? This depends. If its a small enquiry then this could be resolved by a single letter. Generally speaking, the average time for an aspect enquiry in a small case is usually between 3-6 months. However, for a full blown tax investigation, this could take as long as 18 months.

How far back can HMRC investigate? In normal cases (innocent errors) HMRC can investigate the last four years. For deliberate errors (submitting tax returns with errors) they can investigate further back to 6 years. If they suspect deliberate tax evasion then they can go as far back as 20 years.