Tax investigations often involve the launch of an enquiry by HMRC into the affairs of a UK individual, business or other entity. It can cover the full range of taxes such as income tax, corporation tax, capital gains tax, tax credits and VAT.
Investigation proceedings generally commence when the Inspector has concerns regarding information that has been supplied to them, usually information that can lead to a potential tax loss.
If you receive a tax investigation letter from HMRC you can be reasonably sure that they feel you have underpaid tax.
There are many forms of tax investigations in the UK:
Code of Practice 9 – A procedure that HMRC use to investigate cases of suspected serious tax fraud.
HMRC Special Investigations – A serious fraud investigation conducted under Code of Practice 9 where the perceived tax at risk is at least £500,000.
Civil Investigation of Fraud (C.I.F) – A serious fraud investigation conducted under Code of Practice 9 where the perceived tax at risk is at least £75,000.
Check of Self Assessment Tax Return – An HMRC compliance check focusing on one or more elements of your self assessment return.
VAT Investigation – A tax investigation focusing on indirect taxes or Value Added Tax.
Tax Credit Investigations – An investigation focusing on your tax credits award.
Avoiding disputes with HMRC can easily be avoided. Income tax returns filed by taxpayers are often incorrect due to simple mistakes, accidents, oversight, confusion, or misunderstanding of the law. No matter what the reason, when incorrect returns are identified, they must be corrected, either immediately, or after the conclusion of any criminal proceedings that might be undertaken.
It is important to cooperate when a tax investigation has been requested and using the services of a good accountant is an essential requirement.
Very often, engaging the services of a good accountant to support the tax investigation process will very likely avoid the type od scrutiny that can lead to an investigation.