Avoid the Cost of HMRC Investigation
Tax investigations by HMRC have been on the rise for a number of years. Anyone can be selected for an investigation by HMRC, whether you are a business, a director or an individual taxpayer.
What does an investigation involve and why does it happen?
Put simply, a tax investigation is when HMRC decides to take a closer look at your finances to ensure you, or your business, is paying the right amount of tax, both now and historically. Although it may seem alarming, it does not mean you have done anything wrong. HMRC is using more sophisticated technology to identify suspect businesses. But they also carry out numerous random investigations to reduce the deficit related to tax collection.
Areas that HMRC may investigate include:
- your Self Assessment tax return
- your VAT returns and records
- your Company Tax Return
- your PAYE records
- any Capital Gains Tax payments made
- Construction Industry Scheme (VAT Domestic Reverse Charge) records
- IR35 payments
The taxman can not only request business documents but can examine assets at your premises, make unannounced inspections and go back six years, and in some case more, to investigate matters.
Tax Collection Key Facts
- the estimated tax gap between what HMRC collect and what they should be collecting is £35 billion
- tax and VAT investigations are a key tool in reducing this deficit
- HMRC launched 137,000 tax investigations in the six months to December 2021, up 9% from the the same period in 2020.
If you are selected for investigation, it is a process with which you must legally cooperate.
This is also the best time to contact your accountant. The preparation for an HMRC visit can take some time, as can the visit itself along with any subsequent work requested by HMRC. So, get in touch as soon as you are advised of the visit so we can start preparing a plan of action.
Who Covers the Cost of Investigation
HMRC inspections and the related work, can be lengthy and as a result costly. Unfortunately a tax investigation is not covered by your usual accountancy fees. This is why we offer clients a fee protection service that will safeguard you against unforeseen professional costs arising from any correspondence or visit relating to an enquiry from HMRC.
By taking advantage of this service you can be safe in the knowledge that the HMRC enquiry process will be handled by a team you are familiar with and who understand your business. We will work on the case for as long as required to ensure you get the best possible outcome, without you worrying about escalating accountancy fees. That way you can continue to dedicate your time to the important task of running your day to day business.
No business is too small or too large for HMRC to challenge; these include tradespeople, farmers, medical professionals, solicitors and individuals. Here are a couple of examples where the fee protection service has stepped in:
Personal Tax: HMRC opened an enquiry into an individual’s Capital Gains Tax position, rollover relief and income from property. A detailed reply was provided, but HMRC continued to challenge the claim for rollover relief. The fees incurred for representation of the enquiry totalled £13,000.
Landlord: HMRC enquired into an individual with several rental properties in the UK and abroad. HMRC requested large amounts of information and eventually focussed on the funding of property purchases. Despite the conclusion was no tax to pay, the associated fees were £5,000.
To help explain further, here are some questions that we are often asked.
What is a Tax Investigation Service? It is a service that protects clients who may face a tax enquiry. If you use the service and are selected by HMRC for an investigation, we will defend your case and you won’t have to worry about the investigation costs. We will:
- liaise with HMRC on your behalf, making sure your case is handled fairly
- check the tax inspector is only requesting relevant information and documents
- challenge HMRC’s arguments to establish the basis of any request is correct
- handle all related correspondence, phone calls and notices with HMRC
- prepare for and attend face-to-face meetings with HMRC.
What does it cover? The tax investigation service will cover our professional fees should HMRC investigate you.
What is not covered by the service? The service does not cover routine compliance work such as filing your tax return etc. It will not cover criminal prosecutions and fraud, or any tax interest or penalties that may be payable as a result of an investigation.
What are the benefits? Peace of mind. We can’t take away the anxiety of an investigation, but we can provide the best possible advice without you having to worry about the cost.
You will also have free 24/7 telephone access to a team of qualified solicitors for employment law, health and safety and commercial issues.
How much will it cost me? Please get in touch so we can give you a tailored quote. We hope you never have to face an investigation, but when past enquiries have occurred, our clients have been relieved they chose protection cover.
Sadly, no taxpayer is immune to HMRC investigations. That is why we strongly advise that clients take up the fee protection service.
Dealing with day to day financial demands is complicated enough. But having to manage a HMRC investigation as well, can simply be impossible. If you decide to use our protection service, you already know that you will be dealing with a familiar face who you can trust, someone who knows you and your affairs and always has your best interests in mind.
We believe that we know your finances better then anyone, and we want to be there for you when you need us most.
If you would like more details about our fee protection service or if you have any worries or concerns about an HMRC tax enquiry, please get in touch.