HMRC investigations can be very intensive and Audley Chaucer can provide advice that limits the risk of an investigation occurring or being successful if launched. HMRC’s powers, the penalties they can charge and the resources it is committing to tax investigations have increased substantially in recent years.
In normal cases, the HMRC investigation time limit is 4 years to claim money from taxpayers. If someone has been visibly careless (submitting tax returns with mistakes), HMRC can extend the time limit to 6 years. However, if HMRC suspect deliberate tax evasion, it can investigate as far back as 20 years.
We have experience in running investigations by the HMRC and can advise clients on the chances of success and likely additional tax payable (if any) as a result of an investigation.
A number of indicators that can trigger an investigation:
• HMRC receives a tip-off;
• A high-risk industry, for example one that routinely takes cash payments;
• Directors earn less than employees;
• Returns are consistently late;
• Costs are above the industry norm;
• Tax returns are inconsistent with your standard of living;
• You are in a sector that HMRC has decided to target.
There are three levels of HMRC investigation.
Full Enquiry, where HMRC concerns itself with cases where it believes there is a significant risk of error in the tax return. In this type of enquiry, a review of all records will be undertaken. This can include personal financial records of Directors/Business owners as well as business records.
Aspect Enquiry, when HMRC are concerned about a particular part (or parts) of your accounts and wants more detail. Generally, the outcome points to a genuine mistake or misunderstanding rather than deliberate attempts to evade tax. This type of enquiry shouldn’t be taken lightly and should be treated just as seriously as a full investigation.
Random Enquiry. HMRC picks a selection of businesses completely at random to investigate.
At all times appropriate tax advice should be taken at the earliest opportunity by investors and shareholders in UK companies looking to structure investments to qualify for the various beneficial tax regimes available. Audley Chaucer acts for international companies and high net worth individuals.
Ian Lake
