A tax investigation can be random, risk based and/or intelligence led. For example, HMRC might hold third party information that doesn't agree with numbers in your tax returns.
HMRC have a range of powers that enable them to verify the declared taxable positions including, but not limited to, forcing third parties to disclose information, sharing of information within government bodies, extensive sharing of information with financial institutions and agreements with governments overseas to share information.
It depends! If you owe HMRC tax - you ARE in trouble. You will need to repay the extra tax along with interest and penalties (which could be up to 200%!) Do any of the following apply to you?
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Bad choice. You could end up in court with the judge offering a judgement against you.
Bad move. Unless you are a tax/legal expert, you could incriminate yourself and/or end up paying too much tax, penalties and interest.
The only choice. The value you get is knowledge of tax law and processes, years of training & experience and confidence HMRC will not bully you into submission.
A number of scenerios can play out:
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Evaluate HMRC's legal basis in conducting the enquiry and advise accordingly
Consider the legal issue(s) in question and determine the facts
Weigh the strength of your case and present you with options
Prepare a response(s) to HMRC, represent you as an agent and negotiate on your behalf
It depends on the nature and complexity of the issue at stake. For example, if HMRC want to see evidence of expenditure on machinery, they might request to see invoices and visit your premises and inspect the machinery, this could take 3-6 months. If there is a dispute on the intepretation of tax law, this battle could end up in the courts, a process that could take years.
It is almost impossible to say. It depends on the nature and complexity of your case. Typically, tax advisors will charge a fee up front and then send a bill each month based on the hours spent dealing with you/HMRC/third parties. If specialist advice is needed, this can be very expensive.
If you receive a Code of Practice 9 letter and HMRC give you the option to come clean or face proseuction - do not reach out directly to HMRC or give any information because you may incriminate yourslef. Your first step should be to take specialist legal advice. Once you understand your legal position and are clear how you want to move forward, engage a firm of tax advisors.
Yes
To save you tax!
It is not uncommon for HMRC to make a determination an the amount of tax outstanding, most taxpayers become worried and don't want the stress and will agree to make the payment. If you go down this route, you could be giving away your hard earned cash.
The chances of mitigating a tax investigation can be maximised by using a tax advisor. With years of experience and professional training, we understand how to make claims, elections and disclosures in the tax returns so that HMRC are satisfied all things have been considered and opening a tax investigation will be a waste of time.
Being a limited company and running a business, you should file accurate tax returns because you may invite an HMRC tax investigation London for inaccuracies, be they deliberate or careless.
7% of tax inspections are triggered at random – ‘so HMRC can check that they are targeting their inspections properly and also so that nobody feels safe’
Where individuals fail to report tax to HMRC or report incorrect information, tax legislation allows HMRC to issue “discovery” assessments to recover the tax owed.
