Blackwater Tax Advisers in St Albans, Hertfordshire, UK

What is a tax investigation and why am I being investigated?

A Tax Investigation is an official inquiry into your tax payment history. A Tax Investigation in the UK is conducted by HM Revenue and Customs (HMRC) with the severity of an investigation being completely dependent on the case. There can be many reasons for tax investigations and inquiries, for example;

• Following a tax return;
• As a result of a mistake or misunderstanding;
• Conflicting information from another source or whistle-blower;
• A random check;
• Or, because there is information which is incorrect.

The most important thing is to identify the type of the tax inquiry and how best to deal with it. Sometimes identifying the reasons behind the tax inquiry may assist in that. Often HMRC will be reluctant to disclose very much detail at the outset.
So if you know of an irregularity in your tax affairs and you do not know how to resolve it, or you are worried that you may be investigated or find yourself the subject of a tax investigation or prosecution, then it is vital that you receive expert advice as to how best to navigate your way out of trouble. It is strongly recommended that you consult a specialist tax lawyer as soon as possible. You can have a confidential initial consultation for free with our expert solicitors if you want to discuss your situation. Get in touch with us today.

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How will I know if I am being investigated, or will be in the future?

You will not be notified by HMRC as soon as it is looking into your affairs but if it decides to formally investigate you, you may receive a letter from one of its departments asking you for more information. This usually starts with limited scope such as a local compliance audit asking for more information about your latest tax return or a request for information regarding a property transaction, but it is not uncommon for these investigations to be extended should issues arise.

If HMRC thinks that criminal activity has occurred, such as VAT fraud or serious or extensive tax evasion, then it may open a criminal investigation. You will not know anything about this until you are arrested or receive a letter asking for you to attend a voluntary interview under caution.

But sometimes, even when serious and deliberate tax evasion is identified, HMRC may choose to offer or accept to deal with it on a civil basis by entering into a Contractual Disclosure facility (CDF) under Code of Practice 9 (also known as a COP9 investigation). This is a structured and specialised process which allows HMRC to recover all outstanding tax plus interest and penalties from a person as long as full disclosure is made. If this is achieved, then HMRC will guarantee that the person will not be prosecuted for the issues disclosed.

So if you know of an irregularity in your tax affairs and you do not know how to resolve it, or you are worried that you may be investigated or find yourself the subject of a tax investigation or prosecution, then it is vital that you receive expert advice as to how best to navigate your way out of trouble. It is strongly recommended that you consult a specialist tax lawyer as soon as possible. You can have a confidential initial consultation for free with our expert solicitors if you want to discuss your situation. Get in touch with us today.

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How far back can the HMRC investigate?

HMRC will investigate further back the more serious they think a case could be. If they suspect deliberate tax evasion, they can investigate as far back as 20 years. More commonly, investigations into careless tax returns can go back 6 years and investigations into innocent errors can go back up to 4 years.

An investigation will often start with an enquiry into the last year’s tax return. During their investigation into your most recent documents, HMRC will attempt to determine if:

• There have been no mistakes, in which case they can close the investigation;
• The mistake was due to an innocent error, in which case they may go back 4 years;
• The mistake was due to your negligence, in which case they may go back 6 years;
• The mistake was a deliberate attempt to avoid paying tax, in which case they may go back 20 years.

At any stage in the investigation, HMRC may change its stance on the reason for any mistakes or omissions. For example, if it initially believes that a mistake was a one-off, innocent error but then finds grounds to suspect ongoing negligence, the investigation will be extended to look further back resulting in HMRC requesting more information.

HMRC can also start investigations into an individual’s finances upon information it receives from sources other than the tax return, such as Land Registry information or overseas banking details which can trigger an enquiry. These investigations can go back a similar length of time.

Of course, the further back the HMRC wishes to look, the more stressful and difficult a tax investigation can be for many people. The amount of information and detail requested by HMRC can be overwhelming so it is important to obtain specialist advice at an early stage to ensure you make the right decisions, including challenging HMRC if it is appropriate to do so.

Regardless of what stage of a tax investigation you are at, if you haven’t spoken to a lawyer yet we recommend you doing so. Call our tax investigation team today for a confidential initial telephone conversation, completely free and with no obligation for the future.

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How much tax will I have to pay?

Put simply, how much tax you have to pay depends on whether tax has in fact been underpaid. If so, HMRC will want it paid. However, a tax inquiry will seldom be as clear cut as HMRC believe at the beginning. Often there will be factual variations, sometimes technical tax issues, and often we will discover other issues that will mitigate the tax due.

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