Different types of investigation
HMRC carry out a range of different types of tax investigations. All of these investigations are officially called “enquiries” but they range from simple requests for clarification to criminal prosecutions.
The investigation can look at the tax affairs of different types of taxpayers – for example companies, individuals, businesses, partnerships or trusts.
The whole range of taxes can be reviewed – for example income tax, capital gains tax, inheritance tax, corporation tax or VAT.
HMRC can also look into a business’s role as an employer by examining how it operates PAYE on the pay and benefits it gives to its employees (including a company’s directors).
Different levels of investigation
Some tax investigations, whether personal tax investigations or company tax investigations can be minor and straightforward; these can often be settled by an exchange of letters between HMRC and the taxpayer’s advisor or agent.
Most cases involve much more. HMRC will want to examine business and personal records in order to check that all profits and gains have been declared and taxed correctly. Usually HMRC will want to interview the taxpayer, or visit the business premises. Not only can this kind of investigation take a long time to resolve, it can also seem very intrusive.
Where HMRC suspect tax avoidance, these cases are dealt with under a special procedure set out in Code of Practice 8.
Where HMRC suspect tax fraud or tax evasion these cases are either dealt with under a special procedure set out in Code of Practice 9, though in the most serious cases HMRC will conduct the investigation with a view to seeking a criminal prosecution for the offenders.
Cases which start off at one level can be escalated to a higher level if further information comes to the attention of HMRC during the course of the investigation or if the investigation has been mishandled by the taxpayer’s advisor. This is why it is recommended that taxpayers seek specialist tax investigations advice from the outset of any HMRC enquiry.
Cases using civil procedures
The vast majority of HMRC tax investigations are carried out using civil procedures. This means that HMRC will be trying to reach a financial settlement which will typically include the underpaid tax, interest on the underpaid tax and a financial penalty.
Cases using criminal procedures
These cases are comparatively rare, but where HMRC does choose to prosecute a taxpayer through the criminal courts, they will be looking to recover the tax and interest as in a civil case but instead of looking for a financial penalty they will be seeking a prison sentence.
How Can WLH Tax Help?
Legislation imposes restrictions on what HMRC is allowed to do, and WLH Tax will make sure that the Tax Inspector carrying out the enquiry does not exceed the powers they are given by law.
We will consider the level of seriousness of the tax investigation being carried out by HMRC by looking at who is leading the investigation and the nature of the questions they are asking.
We will give you the best advice on how to deal with HMRC so that you achieve a settlement as quickly as possible whilst minimising your tax exposure. We will ensure that the investigation is handled professionally, so it is not escalated to a higher level and you will avoid being named and shamed. If you need to pay more tax, we will present your case in the best light possible to minimise your liabilities. If you are unable to pay the tax in one lump sum, we will negotiate a time to pay arrangement with HMRC on your behalf.
As far as possible we will take the pressure off you during the investigation by negotiating with HMRC on your behalf. We will keep you informed throughout, and the final decision as to whether or not to accept the negotiated proposals will always be yours.
If HMRC have opened an enquiry into your tax affairs, or the tax affairs of your business, then please contact us for a free, confidential and no obligation discussion. We are happy to have an initial free of charge meeting with prospective clients.