Ensure you’re paying the amount of tax and complying with tax law, HMRC is entitled to check your records at any time. You’ll receive an official HMRC tax investigation letter if your business is selected for investigation. Or they’ll give you a phone call, telling you what they want to investigate.
Tax investigations are more common for certain kinds of taxes than others. If your business is VAT-registered, or you hire and pay employees through PAYE, you should be prepared for routine tax checks. HMRC will always look closely at any areas where it’s common for mistakes to be made.
This article will explain the HMRC Civil Investigation, the types of investigation, and everything about an HMRC civil tax investigation in detail.
Let’s begin!
What Is an HMRC Investigation?
A tax investigation is a check that HMRC performs under which it reviews your tax payment and reposts the history of any UK-based citizen, employee, or company.
HMRC has always been responsible for collecting taxes and ensuring that they pay the right amount of taxes.
HMRC investigation is not limited to income tax. The jurisdiction includes all the taxes, such as:
- Capital gains tax
- Construction Industry Scheme
- Corporation tax
- IR35
- VAT
HMRC’s policy is to deal with tax fraud and cases through civil tax investigation. This is done using the contractual disclosure facility (CDF) but also retains the right to begin a criminal process in any case that fits it.
HMRC usually takes between three to six months to complete the investigation, and sometimes it takes 16 months to complete the investigation.
If HMRC makes contact with you, it’s essential to pay attention to them; respond to them as quickly as you can, and reply to them to resolve the problem as soon as possible.
You should always take the assistance of HMRC civil tax solicitors for HMRC civil tax investigation in the UK.
Three Types of HMRC Civil Tax Investigation
There are three different types of civil tax investigation:
1- Full Enquiry – During a full enquiry, HMRC constantly reviews the entirety of the business records because they believe there is a significant risk of error in the tax. That’s why they look closely at the tax affairs as well as the affairs of the business.
2- Aspect Enquiry – During the aspect inquiry, HMRC always looks at a particular aspect of the accounts, such as inconsistencies in the section of a recent tax return.
3- Random Check – The random check can happen anywhere, regardless of the state of the accounts or whether you trigger an alert.
What Rights Do You Have in an HMRC Civil Tax Investigation?
HMRC is a powerful investing authority that has the authority to several legislative penalties to conduct civil and criminal tax investigations where it is suspended to the taxes or the duties that have been evaded, unpaid, or under-declared or that tax fraud has taken place.
The HMRC civil tax investigation includes:
- The tax that you pay
- Your account and the tax calculations
- Your self-assessment tax return for a given year
- Your company tax return
- Your pay records and returns if you are the employer
- Your vat returns and records if your vat-registered
During the investigation, the team from HMRC will constantly audit your accounts. They might ask to visit the person’s house, business address, or your accountant’s office.
Conclusion
HMRC launches an investigation for you or for your business, it might check a range of records and documents. They will contact you or your accountant in advance to set out the evidence they want to see or the information they’re collecting.
HMRC can investigate a taxpayer’s returns for the past four years to see if it owes any money to the taxpayer under investigation.
