Tax Investigations

Tax investigation defence

An investigation from HMRC can be a hugely stressful situation. Having an experienced professional like Qdos on hand will enable you to handle such an event with the peace of mind that your case will be handled in the best possible way.

When HMRC opens an enquiry into you or your business' tax affairs it doesn't mean that it thinks that you've done anything wrong as HMRC routinely checks a percentage of the tax returns that it receives to ensure that they are correct and in order for HMRC to do this they sometimes require additional information to understand the figures, HMRC also selects tax returns for enquiry at random.

What happens in a tax enquiry?

How HMRC commences an enquiry

HMRC will normally write to you and your advisor if you have one to notify you that it intends to start an enquiry and whether it is looking at the whole of your tax return or just certain specific entries in the tax return.

The letter from HMRC will advise you of what information it requires from you, the date that it should receive the information by and your rights and responsibilities.

It is important that you do not ignore this letter and that you bring it to the attention of your professional advisor/tax specialist as soon as possible as they may not have received notification from HMRC that your tax return is under enquiry.

Please note that even if you have a professional advisor/tax specialist representing you that HMRC will regard you as personally responsible for your own tax affairs and the accuracy of all information supplied to HMRC.

What information will HMRC request?

The information that HMRC will request will depend on the type of enquiry that HMRC are undertaking but will usually be based on the information/records used to complete the tax return and as such HMRC will expect that you will be able to supply the information/records by the reply date shown in its letter. HMRC will normally allow you 30 days from the date of their letter to send them the information/records, but this is not always the case and reply deadlines can be both longer and shorter than this.

Full enquiries

A full enquiry is where HMRC will review every entry on your tax return and will involve HMRC carrying out an in-depth review of the records on which your tax return was based including, if relevant, your business records. In most cases HMRC will request that any information/records are sent to them, but HMRC may also state that they would like to review the information/records at the business premises, the Tax Office, your home or your professional advisor/tax specialist’s office. Please note that there is no obligation on you to attend a meeting with HMRC, but should you choose to do so it is advisable to ensure that you are accompanied by your professional advisor/tax specialist.

What happens once HMRC have completed their review

If following their review of the information/records HMRC find nothing wrong they will send you a letter called a 'closure notice' advising you that HMRC have completed their review, found nothing wrong and are now closing their enquiry and no changes to your tax return will be made.

If HMRC find that you have overpaid tax, HMRC will amend your tax your return to the revised figures and issue you with a tax repayment, they will also pay you interest from the date of your incorrect payment up to the day you get a repayment.

If HMRC find that you have underpaid tax, HMRC will advise you of the changes that they believe are needed to correct your tax return and try to agree these changes with you.  HMRC will ask you to pay any tax due within 30 days of receiving the closure notice confirming the change.

It should be noted that even if HMRC advise you that they believe that your tax return is incorrect, that you can and should challenge their view if you disagree with it.

Interest and penalties

Depending on the circumstances, you may have to pay interest and penalties on any tax that HMRC advise is underpaid. You have a right to appeal against decisions or penalty charges following an enquiry. You can also appeal to stop an enquiry if you feel there aren't any grounds for it to continue.