FREQUENTLY ASKED QUESTIONS
We have tried to answer some of frequently asked questions for tax payers, individuals and business. If you need any further help or explanation, give our team a call for free advice.
What does a Tax Investigation entail and what could be the reason I am under investigation?
HM Revenue and Customs frequently conduct investigations in the UK. It is an authorized inquest on your history of tax payments and the severity of the investigation will be entirely case dependent. Inquiries for tax investigations can be due to multiple reasons, such as:
- Late filing of your returns
- Your income has fallen by a large amount
- Inconsistencies between different returns
- Incorrect information is given
- A tip-off which HMRC has received
- The result of a random check
HMRC are very disinclined to reveal any details, so finding out and identifying why the tax inquiry is taking place could be vital in helping you deal with it more efficiently.
Over what length of time HMRC can go back and Investigate my tax affairs?
Every case is different during a tax investigation and depending on the facts of individual cases this will vary and determine the time scale. In certain situations, the HMRC might want to acquire documents and information up to 20 years previous, but it also may be a lot less depending on case facts.
HMRC investigations are not only expensive but they are also very time-consuming. This may cause a lot of everyday issues for most people, especially if they want to investigate a number of years previously. It is essential for each individual to find a solution quickly with HMRC to avoid unpleasant and over calculated assessments.
What amount of tax do I have to pay?
The amount of tax payable will definitely be dependent on whether tax has previously not been paid up to date and in full- HMRC needs it updating frequently and paid whenever it’s due. Nevertheless, an inquiry of tax is rarely as straight forward as it seems. There could be discrepancies in facts, difficulty in receiving the documents and information they need, and many times there may be some situations that may decrease the amount of tax that is due. The more you can help with the investigation, the less time it could take and also could save additional penalties.
Will there be penalties of tax being underpaid?
Payable penalties will more than likely be issued for underpaid taxes. As well as having to pay the tax that’s underpaid, much of the time there are associated costs and additional charges on top of what must be paid. There are different variations of penalties and these can range from as low as 15% to a maximum amount of 200%, but these are all subject to circumstances and nature of the tax investigation. Advice from experts and regular contact with HMRC is most important to distinguish relevant factors and to deter any unnecessary penalties, it also helps to mitigate the time in which the investigation can be resolved.
Will HMRC need to meet me or Interview me?
Not necessarily, although HMRC may request to have a meeting if deemed necessary. Avoiding this can be easy as meetings can be time-consuming and there are more preferable ways to provide the information they are looking for.
In cases that are more serious, such as if the investigation is for a tax crime, HMRC can demand an under caution interview where all factors have to be taken into consideration for each individual case. Where the cases are of higher severity than normal, HMRC has the right to arrest you and you will be interviewed under caution. Where these matters may arise, you must have a lawyer who is specialized in tax investigation present with you, and not be in attendance by yourself while under caution with HMRC in an interview.
What paperwork I will need to produce?
If you are part of a tax investigation then there are going to be a number of documents that you need to produce. Some of the tax investigation cases that are carried out will involve large volumes of data, including financial records and bank statements. These documents then will need to be carefully analyzed. There is a good chance that you will need to instruct a specialist lawyer in order to help you to not only collate, but also obtain and interpret all of your documents and decide the best way to present it.
If Tax irregularities are found, will I face prison?
Some of the more serious cases of tax fraud could come with lengthy prison sentences. However, it is important to remember that not all criminal prosecutions will result in a prison sentence. In fact, if handled correctly then a HMRC criminal investigation may not result in prosecution.
A tax investigation doesn’t always have to mean that there is a HMRC criminal investigation. A helping hand can come in the form of professional representation, particularly from a lawyer who specializes in tax and has experience dealing with a number of different types of tax investigations. You should also be prepared to offer an accurate disclosure of any irregularities and cooperate fully throughout.
Will I need to prepare for media involvement during the tax investigation?
Whilst plenty has been seen in the media regarding high profile tax investigations, media involvement isn’t always a given. In fact, publicity really only occurs in a small minority of cases. This is usually in those that are high profile, such as celebrities, or perhaps for those people that have built up a large amount of tax fraud, or that are deemed to be a serious offender. In the most part, if you are being investigated for tax fraud by the HMRC, then you won’t need to worry about any media involvement.
How long can I expect a tax investigation to last?
Much like most things in business, the amount of time that a tax investigation can vary greatly. The investigation time will really depend on the scope of what they need to look at, and the volume of paperwork that needs to be looked through. In fact, a tax investigation can take a few months to complete, or it could take as much as a year.
One of the biggest delays that you can experience during a tax investigation is when you are asked for additional information. If you instruct an experienced tax lawyer to help you through the investigation, then you may find that the time that it takes to complete is going to be significantly cut down.
Will anyone else be involved with a HMRC investigation?
Who is involved in your tax investigation will really depend on the circumstances that surround your own circumstances. While some will only involve your company, there may also be times that the enquiries and investigations could reach a wider network. This could include your business associates, any businesses that are linked to you and even your family members or your spouse.
Whilst this extended reach may often be unavoidable, professional support from a specialist in tax investigation can lessen the chance of this and even result in some alternatives. If you do find that the HMRC want to expand their reach, it is important to remember that whilst sometimes unpleasant, it may end up helping your case.
Is there anyway I can avoid a tax investigation?
From time to time tax investigations can occur completely randomly and for no reason. However, there are also some investigations that the taxpayer will be aware of, and that will know one day will happen.
These particular investigations can be avoided. If anyone knows your tax details and finances, it is you. If there are things that HMRC may want to investigate in your tax records, if you are uncomfortable about any areas of your financial records, then you may need to take action. Before you are surprised with an investigation, it may be worthwhile speaking to an expert tax lawyer. Someone who can give you the advice you need in order to avoid a tax investigation or to provide a full disclosure before they come to you. Something that can help your case.
I am under HMRC Tax Investigation, what should I do?
It can be a shock to find out that you are under HMRC investigation. If you do find this out, then it is going to be wise to instruct a specialist solicitor in tax investigation before you do anything else. This will not only help you to understand what is going to happen during the investigation, but can also give you advice on what you will need to provide and what will be expected. You can also rely on your tax lawyer to guide you towards other experts who you may need to encounter during your investigation.