Recent reports suggest that HMRC conducted 337,000 enquiries into UK taxpayers last year, if you are one of them under the spotlight here are some things to consider.

From our recent experience although HMRC temporarily paused launching any new investigations following the coronavirus outbreak, it did not stop all its investigatory work.

Tax enquiries can take many forms and often involve HMRC demanding business records, visiting business premises and even interviewing company directors. There may be several stages involved in these enquiries which can last for several years.

An enquiry can be prompted by any number of seemingly small triggers, for example, something as simple as a mistake being made on a tax return may result in HMRC opening an enquiry.

If HMRC finds any evidence of tax evasion during its enquiry, then it is likely that the scope of the enquiry will broaden out and other tax years will be brought into the investigation such as tax returns from previous years.

A failure to comply with the requirements of a tax enquiry, for example if you miss an information request deadline, can result in a fine.

Before HMRC open an enquiry, it is likely that they will have already collected some information on a taxpayer or a business, or both. We know that HMRC often uses readily available material that can be found on the internet such as social media platforms (where privacy settings have not been turned on), blogs, websites and Companies House records.

If the investigation reveals underpaid taxes HMRC may decide that this could have happened in previous tax years and open investigation into those prior years. In cases where fraudulent activity is suspected to have taken place, HMRC can review a taxpayer’s affairs from up to 20 years ago.

The fact that HMRC have reallocated many staff to help focus on compliance since the introduction of the furlough scheme taxpayers may have some ‘breathing space’ for the next few months. If you have any concerns about your tax affairs it would be sensible to use this time to review your tax returns and correct any mistakes.

Often this type of enquiry starts with an information request or a phone call. However, it is important to note that if HMRC is conducting a check then it is likely that they already have some suspicions and are taking the next step to look into them further.

Don’t delay in getting help from a tax expert who is used to managing an HMRC enquiry it’s not enough to hope they’ll lose interest. Many accountants aren’t comfortable managing the process for their clients so why not speak to one of our experts who can guide you through the process. Or read more on our website.

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Call us on 0115 778 8533 for a free consultation.

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