Tax Investigations

HMRC has the right to investigate you at any point to ensure that you are paying the right amount of tax. They may want to look into a number of areas of your business, including:

• The tax you pay
• Your accounts and tax calculations 
• Your Self Assessment tax return for a given year
• Your company Tax Return
• Your PAYE records and returns if you are an employer
• Your VAT returns and records if you are VAT-registered

It is worth noting that businesses often targeted by HMRC include construction, restaurants, doctors and dentists, and buy-to-lets. They are now looking at private security, property rentals, and specifically in the Midlands have special teams investigating the used motor trade, and those with hidden wealth.

If your business is under investigation, there are three different levels of audit that HMRC might carry out. These are:

• Full enquiry

HMRC will review your entire business records. In investigations into limited companies, they might look into the tax affairs of company directors as well as the affairs of the business itself.

• Aspect enquiry

HMRC will look into a particular aspect of your accounts, for example, inconsistencies in a section of a recent tax return.

• Random check

This could happen at any time, regardless of the state of your accounts or whether you have triggered an alert.

During an investigation, prepare to be asked questions that may feel probing. HMRC may ask to visit you at your home, as well as your business address.

A HMRC investigation may involve them looking closely at a number of areas, including:

• Income Tax
• VAT
• Corporation Tax
• Construction Industry Scheme (CIS)
• IR35

Any other tax

If you are worried that you could be the target of a HMRC investigation, get legal advice from an experienced Cartwright King business defence solicitor

Consider whether you are doing any of the following:

• Paying-in/declaring cash income
• Working ‘off the books’
• Putting personal expenses through a business
• Avoiding mention of foreign bank accounts
• Failing to mention interest on investments
• Paying for services in cash or misdescribing items on an invoice (to help someone else evade tax)

These are only some of the reasons why HMRC may start investigating you. Businesses under investigation will receive an official HMRC investigation letter or phone call, which will make it clear what they want to look at.

Bear in mind that if you use an accountant, they might contact them instead. If this happens, your accountant should be in touch to let you know.

It can be difficult to know how long it will be until a tax investigation is resolved. 

Keep in mind that if you are under investigation by HMRC, it is vital that you seek legal advice to ensure that your position is properly protected. Our acclaimed business defence solicitors have an extensive amount of experience defending clients who are facing tax investigations.

As soon as there is any hint of an HMRC investigation, it is vital that you seek expert advice immediately. Despite the potential seriousness of the situation, there are many ways to reduce it and often to obtain immunity and avoid any criminal investigation or prosecution.

Similarly, you may be worried that your tax affairs could give HMRC a reason to investigate you. If this is the case, you should seek advice to establish any problems and avoid them becoming serious.