HM Revenue & Customs have been placing increased reliance upon computer based analytics to select and investigate unusual annual accounts and tax returns.

Any business at any time may find them subject to a tax investigation by HMRC. The aim of tax investigations is to ensure that all businesses in the country, or who have a country branch or office, are paying the correct amount of tax. Tax investigations may sound alarming, but if you have filed all of your accounts correctly, you cooperate fully with HMRC and if you engage some experienced professional advice and assistance throughout the process, then they don’t need to be scary as you might first think.

What types of investigations are there?

There are two types of HMRC tax investigation:

• Full– if HMRC believes that there has been a significant error in the tax return then they will conduct a full investigation. This will include reviewing all of your business as well as any director’s personal financial records. These can typically take up to months to complete and can cost around thousands in accountant’s fees.
• Aspect– here HMRC will only be concerned with a certain part, or parts, of your accountants. These are often conducted when there is suspicion that a genuine mistake has been made on your tax return. These typically last between months, but can sometimes take longer.

 Why am I being investigated?

There are a number of different reasons why you may be subject to a HMRC tax investigation. HMRC is not required to disclose the reason for an investigation but common triggers can include:

• Regular mistakes on yourtax returns – HMRC accepts that genuine, one-off mistakes happen, however if you are regularly submitting incorrect tax returns then this could cause HMRC to become suspicious and feel the need to investigate matters further.
• You do not have an accountant– in many cases not having a finance professional looking after your books can cause HMRC to become suspicious as it may be a marker that you have something to hide.

We can connect you with a number of accountancy firms in your area that have extensive experience of assisting their clients with the requirements of a HMRC tax investigation – and you can rest assured that each firm the we recommend has been thoroughly vetted to ensure that you will be working with only the very best firms available.