HMRC Investigations

How lawyers can help if you are being investigated by HMRC

Few things are more stressful than being investigated by HMRC. The process of an HMRC investigation will generally start without the tax payer knowing. HMRC use sophisticated software and systems which can pick up red flags and anomalies and HMRC can also use tactics including human intelligence gathering.

In terms of formal notification, HMRC will issue a formal investigation latter. It will be clear from this letter if the investigation is starting with a suspicion of fraud, as this type of letter will be sent out by HMRC’s Fraud Investigation Service.

If the letter you get is not from the Fraud Investigation Service it will make clear whether the investigation is random or whether it relates to an aspect of your tax or is a full tax investigation.

Whichever type of letter you get, if you are concerned, you should seek professional advice. Legal as well as accountancy advice may be wise. 

Tax Investigation

HMRC Investigations normally start with a requirement to provide documents, information or to answer questions. In most cases which do not end quickly with a discrepancy being identified and resolved, you should expect HMRC to want to visit your business premises and they may require  you to attend at an HMRC office. It is common for investigations to start on a fairly narrow basis, in extent and in terms of time period, but the investigation may well be extended in scope or time period.

Deliberate wrongdoing?

Business owners will inevitably feel worried and concerned about a tax investigation. The temptation may be, if you know there are some irregularities, to try and hide the evidence or find a way to delay matters.

The above is never advisable and can often constitute a major error of judgment. It may lead to HMRC taking a tougher line and proceeding against you on the basis of deliberate wrongdoing, possibly amounting to fraud, which can result in criminal as well as civil law penalties.

Business owners are in a particularly difficult position where they are notified that HMRC notifies that they want to look at records relating to a particular aspect of VAT, Corporation tax or CGT but then appear to be widening the investigation. Should you push back against this in the basis that HMRC are fishing for other grounds to penalise you or should you simply co-operate?

Situations like the above call for are experienced advice from advisors who have in-depth knowledge of how HMRC operates and how to protect your position whilst co-operating and not making your situation any worse. Gannons have the expertise you need so please do get in contact.

How long do tax investigations last?

HMRC investigations will typically last a few months and possibly longer and can create significant disruption for your business and a huge amount of stress.

How far back can HMRC investigate?

Most investigations start with focusing on a single year or less but they can be expanded by up to a period of the last 6 years if HMRC suspect bad accounting and up to 20 years if deliberate tax evasion is suspected.

How do you know an HMRC investigation has ended?

The investigation phase will end in 1 of 3 ways :

  • You receive a decision notice from HMRC with civil law tax assessment to pay and possibly sanctions or confirming no action.
  • You reach a settlement with HMRC.
  • Where the investigation is conducted by the Fraud team they will ether charge you, decide on no action or sometimes offer the option of avoiding being charged by agreeing a Contractual Disclosure facility (CDF) . In this case you will have had to have made full disclosure and agreed to pay all outstanding tax plus interest and penalties. In return, HMRC guarantees you will not be prosecuted for the offences you have disclosed.

Legal advice and help with an HMRC tax investigation

Given the severe implications and stress of being investigated by HMRC, if you face this situation or want to pre-empt an investigation by dealing with a historical issue you know about, our specialist tax lawyers can help.  Please do call us for a confidential initial discussion.

Catherine Gannon

Catherine is well known for turning complex problems into solutions. No case is ever easy but she will find a way. In her spare time she runs Gannons a very successful law firm.

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Call us on 020 7438 1060 or complete the form and one of our team will be in touch.