hmrc investigations
As the competent authority, Her Majesty’s Revenue and Customs (HMRC) may for various reasons decide to investigate various aspects of your business to determine if there have been transgressions of any tax laws or regulations. This may not be as common for individuals and smaller business entities and thus many of you may not know why or how this process occurs.WHY TAX INVESTIGATIONS START
Mistakes made on your tax returns (regularly) HMRC may receive a tipoff Your yearly numbers may fluctuate above ‘normal’ margins Your business shows unprofitability for several years Your expenses and earnings do not correlate to industry Directors and management earning less than employees You have omitted to report income
These are just some of the reasons an investigation may be initiated, but any activity which may be perceived as suspicious can also place you under tax investigation, such as having any business dealings with companies or businesses which themselves may have been found guilty of tax crimes, or you may just have been randomly selected.
How HMRC Investigations get Started
Notification
Irrespective of the reason, before the investigation gets underway, you will be notified in writing by the HMRC which will include a deadline for your response (usually 30-35 days).records needed
Depending on the level of investigation, various records will be requested which may include bank and credit card statements, cheque books and pay slips, vat records, pay records and other financial records as may be required.Time for a Tax Investigation
The time period required for the investigation similarly depends on the level of the investigation as well as other contributing factors. This is usually between 3 and 6 months for smaller investigations but can take around 16 months for full investigations.
HMRC INVESTIGATION POWERS
As a failure to comply with tax regulation is construed a criminal offense, the HMRC officials are endowed with criminal investigation authority to counter such acts.
TYPES OF TAX INVESTIGATIONS
HMRC has the right to launch an inquiry into the tax affairs of any individual, small business or other organization and ask for details about income and expenses.