HMRC can assess the tax affairs of any individual or business, and you could be selected for an investigation even if you have nothing to hide.
You might operate in a sector that’s come under scrutiny, for example, or perhaps you’ve filed frequently late tax returns. You could even be selected completely at random.
An investigation might relate to the tax you pay, your self-assessment tax return, business accounts, company tax return, PAYE records, or any VAT records.
If, for whatever reason, you or your business becomes the subject of an HMRC investigation, here’s what you can expect.
Different types of investigation
Like any formal process, there are various stages and procedures to go through.
Random checks can be carried out on any kind of business. If you keep clear and consistent records, you shouldn’t have anything to worry about.
Aspect enquiries are where the tax authority suspects a genuine error, rather than deliberate attempts at tax evasion.
Full enquiries usually occur if HMRC believes there’s a significant risk of error, in which case they can dig into both business and personal records.
If HMRC begins an aspect investigation but suspects more serious fraud, they may reclassify it as a full enquiry.
The procedure
Firstly, you can expect to receive a Schedule 36 information notice, in which HMRC requests information from you to check your tax position.
This has the potential to escalate to what the tax authority refers to as COP8 or a COP9 investigation in the most serious cases.
If HMRC suspects tax fraud or tax avoidance, a COP8 investigation could commence if they want to recover a large tax loss.
With COP9 investigations, civil procedures are used by HMRC where serious tax fraud is suspected.
Voluntary disclosure
If you’re an individual and HMRC suspects you of tax fraud, you might get the chance to come clean through the contractual disclosure facility.
You will have immunity from prosecution for tax offences, in return for a full disclosure of the tax you have not paid. This is not an option for companies.
If you’re the subject of a COP9 investigation, you will usually get the opportunity to make a full and accurate disclosure to HMRC.
This is not to be taken lightly, as the tax authority can escalate this to a criminal investigation with a view to prosecution if it is not satisfied.
How Mayflower can help
If a Schedule 36 information notice arrives in the post, come to us for professional advice at the earliest opportunity.
From that point, we can liaise with HMRC on your behalf to handle all aspects of the investigation until it is resolved.
For more information, email info@mayfloweraccountancy.co.uk or call us on 01525 887277.