Steven StrawtherTax Compliance Director
HMRC tax investigations aren't just something you hear about; they are on the increase. Protect yourself with our Tax Investigation Service
A tax investigation occurs when HMRC make enquiries into the tax affairs of a business or individual. Any person or business that submits a tax return can be investigated by HMRC. The investigation looks for any financial irregularities, mistakes, or potential signs of fraudulent activity.
Many tax investigations are random. Unusual fluctuations, undisclosed accounts and random spending can also prompt an enquiry into individuals and companies.
With a budget deficit of over £355 billion, we fully expect HMRC to raise more enquiries this year to increase tax revenue and plug the hole left in the government’s finances due to the economic damage caused by COVID-19.
Even if you have done nothing wrong, many tax enquiries are conducted at random.
Powerful new software can trace even the smallest discrepancy in spending or earnings, prompting an investigation into individuals and businesses. 83% of tax investigations are triggered by HMRC’s ‘Connect’ system.
HMRC is putting additional resources into detecting errors and suspected fraud by businesses claiming R&D tax reliefs. This includes recruiting 250 trained staff dedicated to identifying potential misuse of the R&D scheme. It has never been more important to ensure your R&D tax relief claims are done properly. However, if you are investigated, the Shorts Tax Investigation Service will be able to help.
HMRC investigations can be disruptive, intrusive, and expensive. The process can drag on for a year or more, creating mounting costs and rocketing stress levels, even if there has been no wrongdoing.
For limited companies and partnerships, the policy offers inclusive protection for relevant individuals. When the business signs up, all directors, partners, their spouses, and the company secretary of the business will also receive representation during an enquiry into their personal affairs as well as the business.
Some conditions apply, please read our full service summary.
When you subscribe to our Tax Investigation Service, we are able to make a claim against our insurance policy held with Professional Fee Protection in respect of our fees incurred (up to £100,000 per claim unless otherwise indicated) when we defend a client who is subject to any of the following events:
Some exclusions apply, so we encourage you to read our Tax Investigation Service summary for more information.
When you subscribe to our Tax Investigation Service, you also benefit from access to a free client legal helpline. The cost of supporting you throughout an investigation is not covered in our usual accountancy fees.
HMRC Launched over 1,000 prosecutions against individuals last year – beating its target yet again.
HMRC has stepped up their hunt for extra revenue by increasing the number of penalties imposed on taxpayers for ‘deliberate’ errors on tax returns by 46% in the last 12 months up to 6,125 from 4,138.
Last year HMRC collected £34.1bn from tax investigations and enquiries.