Are you being investigated by HMRC? Do you have any questions about tax investigations? Here are some of the common questions that clients ask the tax specialists at Churchill Tax Investigations:
What is a tax investigation?
There really isn’t a definitive answer to this question. A tax investigation will take many forms with some investigations being more serious than others. When subject to any tax investigation, HMRC will meticulously review your accounts and supporting paperwork because they believe that there has been some kind of questionable activity in relation to avoiding tax.
Why have I been selected to be investigated?
The majority of tax investigations relate to the accuracy of a tax return and accounts submitted by businesses or individuals. If you receive a notice informing you about a compliance check, HMRC believe that you have underpaid tax either due to fraud or negligence. HMRC will consider numerous elements of your business including economic issues, risk and results from similar businesses in your local area.
How long will a tax investigation take?
There is no set timescale for an investigation. The length will depend on the complexity of the case and the size of the investigation.
How far back can HMRC investigate?
HMRC can ask to see records for your business for the past 20 years depending on the seriousness of the matter and behaviour of the tax payer. This is why it is so important to keep full and accurate records of your business.
I have been notified of a VAT inspection. What happens now?
HMRC conduct VAT inspections to ensure that businesses are paying the right amount of VAT and this can initiate a VAT investigation. Some VAT inspections may be carried out at random while others are conducted because they have discovered information which may indicate that there is something not right about your VAT records.
What is the process for a tax investigation?
This will depend on the nature of the enquiry and seriousness, with there being different procedures for Code of Practice 8 (COP 8) and Code of Practice 9 (COP 9).
Could the person being investigated go to prison?
Although criminal prosecutions are rare and they are usually only given to those who have committed the most serious type of tax fraud, if you do not cooperate with HMRC they can automatically launch criminal investigations into your tax affairs.
What about interest and penalties?
HMRC will charge you interest on any taxes that you have underpaid from the original due date through to the date the tax is paid in full. You may also have to pay a penalty for the underpaid tax.