What happens if I have been selected for a tax investigation?

Being subjected to a tax investigation can be a very stressful experience. Any person or business can be selected for an HM Revenue & Customs (HMRC) investigation at potentially any time – meaning you never know when an enquiry might be just around the corner.

The process typically begins with a letter from HMRC notifying the taxpayer that an investigation is being undertaken. HMRC is not under any obligation to provide a reason for the investigation, but this letter will usually request a response within a tight timeframe – usually of between 30 and 35 days.

The first step to take is to seek specialist advice before responding to this letter within the set timeframe to avoid the likelihood of any penalties. This applies to any written requests received by HMRC throughout the investigation process.

The level of enquiry HMRC chooses to pursue will be either an ‘aspect enquiry’ or a ‘full enquiry’. However, HMRC appears to have moved away recently from stating this explicitly in the letter, instead describing its enquiries as a “check of your self-assessment tax return”.

What are the differences between the two types of enquiry?

A full enquiry will delve into much greater detail and will usually require the recipient to provide HMRC with business records for the entire year of enquiry, while an aspect enquiry may only focus on an individual aspect of a tax return and is likely to be resolved much more quickly.

Aspect enquiries typically take between three and six months, while a full enquiry could run on for 16 months or longer. By seeking specialist advice early, it is easy to ensure that the matter is resolved quickly.

What might an enquiry involve?

What the investigation involves will depend largely on the level of enquiry, but in most instances HMRC will request the likes of bank statements, paying-in slips, VAT records, payroll records and more.

If a business’ records are kept electronically, they will be asked to provide details of the cloud accounting software package they use as well as a copy of their records on a disk.

Those under investigation should respond to any enquiries received from an HMRC investigator within the timescales given and should receive replies to each response within 28 days. They may also be asked to attend a meeting with an inspector.

Once the investigation has concluded, the inspector will inform the person or business under investigation of any adjustments required to any previous errors or misstatements in their tax returns.

In some cases, a penalty may be payable or the investigation could even result in criminal prosecution. In others, however, HMRC might confirm that no adjustments whatsoever are required and no further action will be taken.

Specialist support for HM Revenue & Customs enquiries

If you are the focus of an HM Revenue & Customs (HMRC) enquiry or dispute, you need expert help and support through the process. MGI Midgley Snelling LLP will attend any HMRC enquiry meetings with you and correspond with them regarding any queries raised.

We provide a tax enquiry fee protection service to cover the professional fees incurred if you are subject to an enquiry. As a result, you have the peace of mind that, no matter how long the process takes, the cost of our fees is covered. If you would like to know more about how we can assist you with your HMRC enquiry, please contact us.