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, corporation, capital gains, 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 loss.
If you receive am investigation letter from HMRC you can be reasonably sure that they feel you have underpaid on the amount that is expected.
There are many forms of investigations in the UK:
Code of Practice 9 – A procedure that HMRC use to investigate cases of suspected serious taxation 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 – An investigation focusing on indirect taxes or VAT.
Tax Credit Investigations – An investigation focusing on the credits received.
Avoiding disputes with HMRC can easily be avoided. Returns 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 an 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 in advance will very likely avoid the type of scrutiny that can lead to an investigation.