A Random Tax Investigation is an enquiry that is randomly performed on the tax return of an individual or business. This is commonly a full enquiry and is performed as a spot-check by HMRC. These have become increasingly prevalent in recent years as HMRC has increased its attention to potential tax avoiders.
Where normal Full Tax Investigations are commonly triggered by a discrepancy in a a business’ finances, Random Tax Investigations are performed entirely at random on any given business, with particular emphasis targeted at higher risk tax areas/sectors in a bid to discourage negative tax practices and tax evasion. A typical target would be SMEs (Small to Medium Sized Enterprises).
By utilising a spot-check approach, HMRC can use Random Tax Investigations as a tool to evaluate tax returns across an areas/sectors of high risk and allows them to assess if the tax system is operating fairly.
If you are subject to a Random Tax Investigation and find yourself overwhelmed, it is wise to seek professional tax advice. Tax advisors can help further explain matters and ensure you are in compliance with HMRC’s legislation and in turn that HMRC complies with the appropriate legal proceedings.