As the name suggests, a Full Tax Investigation is an enquiry looking into the entire tax return of a business by way of investigating the businesses records. This may include full personal records belonging to the directors and/or business owners as well as any business records. HMRC will request submission of all business records for the year of the enquiry, though this may vary depending on the nature of the investigation. Common submissions that are requested by HMRC to perform Full Tax Investigations are: bank statements, credit card statements, VAT records, payroll records, purchase and sale invoices or till records, expense receipts, job quotes/estimates, cheque books and paying-in slips. Where computerised records are kept by a business, HMRC can request details of the software packages used and a copy of the records on disk.
The time taken for the Full Tax Investigation varies depending on its nature and can be considerable in length, the average duration of a Full Tax Investigation is approximately 16 months. Due to their comprehensive nature, Full Tax Investigations typically take the longest to perform and are resource heavy. Due to their resource heavy nature they will usually only be undertaken where HMRC believes a significant risk of error in a tax return is present. As such, when a Full Tax Investigation is initiated by HMRC, the receiving party should take the enquiry seriously as they could be suspect to evading tax, though some Full Tax Investigations are performed routinely. In some cases a Full Tax Investigation is executed purely at random, termed a Random Tax Investigation.
If HMRC do start Full tax investigative proceedings, it does not mean you are necessarily suspect, and it’s important to keep this in mind, stay calm and be as communicative and compliant as possible throughout the process. A tax advisor can help in such circumstances to ensure that both parties operate fairly.