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Tax Services Tax Investigation

A tax investigation is an official enquiry to recover undercharged taxes in previous years of assessments. 

Thus, an in-depth analysis of the history of tax payments is required. Her Majesty’s Revenue and Customs (HMRC) are responsible for conducting tax investigations in the UK and assessing the severity of the investigation. 

The main purpose of carrying out a tax investigation is to ensure that you are currently paying the right amount of tax.

Tax Investigation

How Does It Work?

A tax investigation can either go on for a few months or a year depending on the severity of the case. You will know if you are undergoing a tax investigation because you would have received a postal brown envelope marked ‘HMRC’ through your letterbox. Depending on the reasons for the investigation, your financial records will need to be submitted for assessment. For further details about what types of financial records, you will need to speak to one of our tax specialists. Subsequently, if errors have been found in your financial statements, you could face penalty charges or prosecution.

How Does It Work?

A tax investigation can either go on for a few months or a year depending on the severity of the case. You will know if you are undergoing a tax investigation because you would have received a postal brown envelope marked ‘HMRC’ through your letterbox. 

Depending on the reasons for the investigation, your financial records will need to be submitted for assessment. For further details about what types of financial records, you will need to speak to one of our tax specialists. Subsequently, if errors have been found in your financial statements, you could face penalty charges or prosecution.

Why Choose Us?

Don’t wait to let your taxes trouble you. Talk to one of our advisors today at Carrington Blake Accountancy.

We will:

  • Assure you that your finances and investigation are being managed correctly and efficiently.
  • Support you with our cost-effective expertise and knowledge.
  • Provide you with a team of experts, who will deal with matters on your behalf.
  • Help you protect your assets.
  • Help to reduce the time-duration of your investigation.
  • Reduce the risk of severity developing in your investigation.

Why Does This Happen?

There are many reasons HMRC may commence a tax investigation

  • unusual entries on a self-assessment
  • tax evasion
  • cival tax fraud
  • assessing conflicting information from another source
  • carrying out spontaneous tax checks

However, during a tax investigation, HMRC will be reluctant to disclose the detail at the outset. Therefore, if you suspect yourself of becoming the subject of a tax investigation, it is essential that you seek expert accountancy advice to help prevent you from getting into trouble.

Tax Investigation

The Types of Tax Investigation

There are three different levels of audit that HMRC can carry out:

Full enquiry

During a full enquiry, HMRC will review the entirety of your business records, usually because they believe that there is a significant risk of an error in your tax. When investigating limited companies, they might look closely into the tax affairs of company directors as well as the affairs of the business itself.

Aspect enquiry

As the name suggests, during an aspect enquiry HMRC will look at a particular aspect of your accounts, such as inconsistencies in a section of a recent tax return.

Random check

Just as it sounds, random checks can happen at any time – regardless of the state of your accounts or whether you’ve triggered an alert.

What Are The Outcomes?

What happens next is determined by HMRC’s findings. The following are some of the most frequent results and solutions:

Overpaid Tax

The taxpayer will receive a tax rebate plus interest in this case.

Underpaid Tax

As a result of this finding, the taxpayer will be formally ordered to pay any tax due within 30 days, possibly with interest.

Intentional Wrongdoing

If HMRC conducts tax investigation and finds that the taxpayer engaged in purposeful wrongdoing, the matter may be escalated to criminal status.

You may be required to pay a penalty if this occurs. The amount will be determined by considerations such as why you underpaid or over claimed tax, whether you reported any errors to HMRC as quickly as feasible, and whether you cooperated efficiently.

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What Does a Tax Investigation Procedure Involve?

HMRC will audit your accounts and ask you a series of questions during the investigation. They may request to meet with you in person at your home, business, or accountant’s office.

They will investigate all taxes including:

  • Capital Gains Tax
  • Construction Industry Scheme (CIS)
  • Corporation Tax
  • Income Tax
  • IR35
  • VAT
  • Any other tax

FAQ’s

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