HMRC COMPLIANCE CHECKS
A compliance check by HMRC is usually carried out by HMRC’s local compliance division. The majority of compliance checks are initiated because HMRC believes that there is an error with your tax return. Only a very small number of checks are carried out randomly. HMRC only conduct compliance visits if they have identified a tax risk which is a situation where they believe that additional tax may be payable. The best way that they check this is to open an investigation into the business or individual.
A compliance check will meticulously review the previous tax return that you have filed. Tax investigations are usually instigated within 12 months from the date that the tax return was filed with HMRC.
VAT visits and inspections
VAT officers can visit your business to inspect your VAT records and make sure you’re paying or reclaiming the right amount of VAT.
HM Revenue and Customs (HMRC) usually contact you to arrange a visit.
They normally give you 7 days’ notice. They’ll confirm what information they’ll want to see, how long it’s likely to take and if they want to inspect your premises. You can ask them to delay the visit.
HMRC can also visit without an appointment and telephone you about your VAT.
How often you get a visit depends on:
- how big or complex your business is
- whether you’ve submitted late or incorrect VAT Returns before
These situations can lead to a deeper VAT Investigation, other reasons can be the HMRC suspect VAT Fraud involved and wish to probe a business and its history. We specialise in representing our clients in all such matters.
Code of practice 8 TAX INVESTIGATION
What is COP 8 Tax Investigation?
Most customers pay what is due but some deliberately try to pay less than the correct amount or take advantage of a scheme or device to reduce a tax liability. If HMRC suspect this, they will investigate under Code of Practice 8 to establish the facts to recover any tax, interest and penalties due. We will not undertake this investigation with a view to a criminal prosecution but we may take a different approach if we suspect or find evidence of fraud at any time during our investigation. We may then deal with the investigation under Code of Practice 9.
HMRC will investigate any situation where we believe that there may be a significant loss of tax. This includes the tax affairs of individuals, partnerships, limited liability partnerships (LLPs), Limited companies
Our firm takes a positive and proactive approach to all tax investigations, no matter how complex they may be. We not only aim to reduce the amount of information that you have to present to HMRC but you will also have to meet with HMRC in the initial stages of the investigation to identify their concerns and ensure that the enquiry does not turn into a COP 9 Investigation.
PAYE Tax Investigations
A PAYE audit is a check by HMRC to ensure that an employer is paying all correct PAYE tax and National Insurance obligations.
It can also cover working families’ tax credits and any other matter administered by HMRC.
The areas covered as part of these enquiries are:-
- Operation of PAYE
- Deduction of National Insurance Contributions
- Benefits in Kind
- Employment Status
If HMRC finds errors on your behalf they will issue penalties. These penalties can be up to 100% of the tax due but will be dependent on your co-operation with their enquiry and the nature of the errors.
It is important to get professional representation for all tax matters to negotiate with HMRC on your behalf.
Corporation Tax Investigation , Code of Practice 14
Code of Practice 14 deals with Company Tax Return Enquiries and claims made outside a return for accounting period ending on or after 1st July 1999.
Some Company Tax Returns are chosen at random for enquiry and checked for errors.
If you have received a Code of Practice 14 notice from HMRC you need to contact a specialist for professional representation during your Company Tax Return enquiry.
HMRC, formally the Inland Revenue, will inform you in writing that they intend to start a Code of Practice 14 corporation tax enquiry and will also tell you if they are looking at your whole company tax return or only at specific areas.
This means they will start either a Full or Aspect enquiry into your Company Tax Return.
HM Revenue and Customs have 12 months from the date the Company Tax Return was due to have been submitted to tell you that they intend to start a Code of Practice 14 corporation tax enquiry. If you submit your company tax return late, then the Revenue have 12 months from that date to enquire into your company affairs.
Our firm specializes in particularly VAT investigations, we have been fighting cases for our clients for the past 40 years and achieved the most exceptional results, Contact our specialists today for a meeting to discuss your situation or any problems you are faced with.
There really is no way of knowing exactly how long an enquiry by HMRC will take. The length of a tax investigation depends on the size and complexity of the case. Remember you need professional advice from a tax investigation expert who will know what HMRC want and how to present it to them. Never ever deal directly with HMRC during your tax investigation.
HMRC can request records and run a tax investigation for the past 6 years however they can also go up to 20 years by getting permission from the courts if the case has sufficient reasoning .
This is just one reason it is so important to keep proper and accurate records. Records are not always available so If you don’t have the records to back up any claims, HMRC may make incorrect assessments for additional tax they claim is owed. If you thought “Oh it was such a long time ago, I’ve got away with it now” then you may find yourself very much mistaken. Don’t leave it to chance; get expert, confidential tax investigation advice and sleep soundly.
In serious tax investigation cases HMRC can launch a criminal prosecution over tax evasion and criminal prosecution is unlikely to happen if you are upfront and honest about any tax irregularities you may have during tax investigations. If you continue to lie and cover up the truth during tax investigations then HMRC may go full throttle with a criminal prosecution. Get a professional tax investigations expert who will do everything to ensure HMRC do not launch a criminal prosecution into your tax affairs. To avoid criminal prosecution during tax investigations speak to a professional tax expert!
It’s a situation that most people dread – HMRC have opened an investigation into your finances. However, it’s not the end of the world; there are a number of different things that you can do to make the process run a lot smoother.
1) Try to stay calm You are being investigated, not prosecuted. Even if HMRC find something amiss, a custodial sentence is very unlikely.
2) Get expert advice As soon as you receive a letter from HMRC informing you of an investigation, it is imperative that you appoint a professional tax investigation specialist. Our team consists of ex-Inland Revenue tax
3) Discretion is key Your tax affairs should be private. If you are receiving tax advice from experts, these are the only people that you should be discussing your affairs with. Your mates down the pub are not going to able to provide you with expert advice that such a delicate situation requires. If the investigation ends in a settlement, again, keep it to yourself. Boastfulness can lead to more problems than it’s worth; you never know who’s listening and the last thing you want is your case being re-opened!
4) Honesty is the best policy Always tell the truth. Lying to HMRC will do you no favours in the long run.
5) Never underestimate the Taxman Never assume that the Taxman has missed, or is unaware of, anything. HMRC have an incredible amount of resources available, they can uncover any details at any time.
6) By failing to prepare, you are preparing to fail Make sure you are prepared for any meetings and any questions.
7) Don’t tamper with evidence HMRC can go back as far as 20 years if they feel the situation warrants that level of scrutiny, so hiding or destroying evidence may lead to your case being treated even more seriously. If you cannot present the appropriate paperwork, they may assume that you are trying to hide something.
8) Explain the whole situation Be thorough. Don’t leave any stones unturned. In serious cases, misleading or false statements could lead to prosecution.
HMRC will only notify the taxpayer who is under tax investigation. They will not send a letter to your boss or your neighbour or your second cousin twice removed. However, if you are found guilty of tax evasion, under rules from 2018, HMRC may ‘name and shame’ taxpayers who have evaded more than £25,000. Appoint an experienced tax investigation expert who will negotiate with HMRC and make sure you suffer no more degradation in your tax investigation and no public humiliation by being ‘named and shamed’. It is your only chance.
The most likely reason HMRC will run tax return tax investigations is that they have information which leads them to believe that your tax return is not correct. HM Revenue and Customs (HMRC) can launch tax investigations into tax returns on a random basis to check that tax returns are correct. However, random tax return tax investigations do not happen very often. If you do find yourself under tax investigation you should speak to an expert in tax investigations immediately.
VAT inspections may be random but also occur due to information received which may indicate there is something wrong with your VAT records, instigating a VAT Investigation from an inspector from HMRC. HMRC carry out Value Added Tax (VAT) inspections to make sure that you are paying the correct amount of VAT. This can trigger a VAT Investigation. You might also face a VAT inspection if a company associated with you is under VAT Investigation and has been found to have irregularities in their records or tax returns. HMRC may send you their VAT investigation queries in writing or in the form of a short VAT Investigation questionnaire instead.
HMRC Tax Investigations Inspectors are told and trained to invite you to attend an HMRC interview with them, as this is their best chance to trip you up. There is no legal obligation for you to attend a tax investigations meeting, apart from in two specific types of tax investigations; Code of Practice 9 and Section 144 Tax investigations. We do not advocate meetings between our tax investigations clients and HMRC inspectors. Get professional help to arrange these meetings for you.
We have answered a number of questions about the process below. HMRC wants to investigate my affairs. Does that mean I have done something wrong? Not necessarily, HMRC often checks a number of tax returns at random. This is considered to be a routine enquiry.
Typically, HMRC has 12 months from the date it receives your tax return to inform you that they are starting an enquiry. Late or amended returns, or those with deliberately misleading information, could carry other deadlines.
Not at all; you have the right to representation, and this is where a professional tax advisor comes in. They will fully understand everything contained within the letter and will be able to explain and provide advice on the most complex areas of tax investigations in a clear and concise manner. All you then need to do is complete the 64-8 form to confirm that they have permission to speak to HMRC about your affairs. It’s as easy as that.
In normal cases you will be given 30 days to provide the supporting information, but you can request an extension if this is unreasonable. Unless HMRC decides to conduct an extensive investigation into your tax affairs, this will likely be the end of the matter.
Most routine enquiries are conducted by post and in this instance, you are not under any obligation to meet with HMRC. However, if you do choose to meet with an HMRC official you can do so at your home, local tax office or business premises. If you have a professional tax advisor helping you this can be at their offices.
If everything checks out, you’ll receive a ‘closure notice’ informing you that the enquiry has finished, and no changes will be applied to your tax return. Alternatively, you may have paid too much or too little tax. If you’ve paid too much, you’ll receive a repayment. If you’ve paid too little, HMRC will require the outstanding payment within 30 days.