Tax investigation can be daunting & intimidating and are often avoidable.To help protect yourself, it’s best to seek expert advice as soon as possible.
Tax investigation or interventions as they are more commonly known into self-assessment or corporation tax returns including VAT inspections are a real good money earner for the Government. We believe that the right support can make all the difference.
Statistics suggest the numbers of tax investigations are on the increase, it’s almost certain that one day you will become the subject of an enquiry. These can come in many forms it could the local tax office aspect enquiry looking at just one part of your tax return, or it could also mean potential criminal prosecutions.
If you are facing any tax enquiry, we would always recommend you take immediate expert advice. Expertise and a safe pair of hands can dramatically change the outcome and you can be rest assured of ABS Accountancy to smooth the process itself too.
Why not let us take the stain so you do not have too and ensure your tax problems do not become a major obstacle to tackle.
Support you need
Her Majesty’s Revenue and Customs (HMRC) are a mighty formidable authority, with government demands it’s throwing more and more resources into enquires and its now becoming more proactive with campaigns and targeted trades and professions.
A tax investigation can take on many forms. It could be a local tax office aspect enquiry looking at just one part of your tax return, or it could also mean potential criminal prosecutions. Inspectors are gaining more and more formal powers too. The impact on you or your business can be large and time consuming.
Getting help at an early stage can make all difference. Of course we can help at any stage, but our job is always easiest if you call us before you enter any correspondence and before you’ve attended a meeting with the inspector.
Self assessment is exactly what it says it is, you ‘self-assess’ but HMRC reserves the right to check the accuracy of the return, there are many reasons why returns are investigated and selected; however, the exact reasons are never divulged by HMRC. It may just be a random enquiry; some begin through third party Information (via an informer). There is also the Proceeds of Crime Act where banks and other financial institutions are compelled by law to make a report, also via other intelligence and specialised risk reports can also provide HMRC with avenues of enquiry.
What powers do HMRC officials have to obtain information from me?
The Taxes Management Act says that, for the purpose of enquiring into a tax return, a HMRC officer may require the taxpayer to produce such documents as are in the taxpayer’s possession or power, and which may reasonably be required to determine whether the return is incorrect or incomplete. If you do not posses such documents that are required, and it is not in your power to obtain them, you cannot be required to produce them.
Note that in certain circumstances, it can be a criminal offence to destroy documents which may be required by HMRC in a tax investigation. In criminal investigations, HMRC may obtain a search warrant to enter your home and your business premises to obtain such information.
HMRC also has a specific power to oblige third parties (such as accountants, banks etc) to produce documents which are in their possession or power and which “in the inspector’s reasonable opinion” may contain information relevant to the tax liabilities under investigation. Normally inspectors are able to obtain information about a specific person under investigation.
Can I be prosecuted?
If the offence you have committed is serious and involves a large amount of tax, then yes you can be prosecuted. However, there are only a small number of prosecutions carried out each year, and they often successful. HMRC aims to prosecute for a wide range of offences, to act as a deterrent.
You are more likely to face a prosecution where at least one of the following elements are present:
- Deliberate concealment or deception
- Deliberately falsified or forged documents, certificate, statements claim etc.
- A history of tax evasion.
Penalties, offences and evasion
Civil penalties are common for most offences, as they provide a source of revenue to the government. Typically you’ll owe the amount of tax evaded plus a penalty up to a maximum of 100% on the potential lost revenue, but these can be reduced to around 20% depending on co-operation with the inspector.
You can sometimes agree a financial settlement instead of proceedings (‘compounding’) but any summary conviction or conviction on indictment, can mean unlimited fines and/or up to seven years imprisonment.
How long do enquires last?
There is no simple easy answer, as this depends on both the speed of the inspector and that off you or the person handling the investigation on your behalf. It is like saying how long is a piece of string? However on average you are probably looking at up to 12-18 months, from start to finish although it has been known for enquires to extend up to 2 or 3 years or even longer in some extreme circumstances.
What happens at the end of the enquiry?
Presuming there are no required changes or only minor ones, then a closure notice will then be issued by HMRC this will bring the enquiry to an end. You will also be invited to accept and agree this notice.
If there are issues, these will have been made clear in correspondence or during/after any meeting with have had with a HMRC inspector. If you agree with the additions the inspector will then calculate what you owe with possible penalties and interest as mentioned above. If you don’t come to an agreement HMRC will issue closure notices, with adjustments in keeping with what they believe to be correct. You have the right to appeal these notices, in which case the whole case is reviewed by an appeals unit.
If the inspector believes that you are at a high risk that you may continue to get your tax affairs wrong, they may place you into the MDD programme (Managing Deliberate Defaulters). If the inspector decides to put you into this programme they will write to tell you, they will explain what obligations they require you to meet.
All these situations need careful handling. Our team can help you resolve any predicaments and we can make sure that any voluntary disclosure gives you maximum advantage. Our goal is to make sure that the relevant tax is paid, and that the risk of potential proceedings taken against you is minimised. These mean working closely with you and that of the inspector to ensure the appropriate right actions are taken at the right time.
If you have concerns about either aspect of HMRC enquires/checks, please contact one of our experts either by phone or personal meeting, on a no-obligation basis. Or download our guide, written specially for you by our team of experts.