Time constraints for HMRC tax investigations

The good news is that HMRC has a time restriction in which to launch an Tax investigation. Typically, an inquiry will take place within 12 months of the deadline for dealing with your yearly review.

Penalties

A penalty may be imposed if you need to make changes to your tax or VAT return. The severity of the penalty is determined by the cause of the error. If you clearly took care with your return but made a genuine mistake, the punishment is less severe than if you purposefully faked the return.

For a genuine error, you'll most likely be requested to pay the outstanding tax within 30 days of the ruling. Interest may also be added.

If purposeful misbehaviour is uncovered, you could face serious consequences. Typically, you'd be looking at an additional 15-100% on top of your payment, but this might range up to 300%. In more egregious cases, a criminal prosecution may be pursued. This is where it pays to be helpful; if you cooperate with the investigation, or detect the problem and willingly disclose it, the penalty will almost certainly be lowered.

If you disagree with a decision, you have 30 days to appeal.

Can your tax affairs be probed back how far?

If only small changes are required, HMRC may not check past returns. However, with bigger modifications, earlier years are more likely to be included.

In the event of a negligent error, the settlement can consider up to six previous years. This is the more typical scenario. If the error was intentional, HMRC has the authority to go back 20 years.

Criminal inquiry policy at HMRC

Although HMRC will, if appropriate, conduct a civil inquiry into suspected fraud, it also has the authority to conduct a criminal investigation in a variety of scenarios. These are instances in which willful concealment or corruption is suspected, or where counterfeit documents are uncovered.

Again, if a business willingly gives facts of where mistakes were made or offences were committed, HMRC considers this favourably when deciding whether to continue a civil or criminal investigation.

lowering your chances of being investigated by HMRC

While there is no guarantee that your firm will be immune from a tax inquiry, there are steps you can do to lessen your chances of being subjected to one. These are some examples:

• Making certain that refunds are submitted on time
• ensuring that the returns supplied are correct
• Provide information about any modifications before it is requested.
• Maintain detailed records to substantiate claims as needed.
• Obtaining Assistance

If you have received notification that HMRC intends to investigate your tax or VAT issues, please contact THP Chartered Accountants. We'll communicate with HMRC on your behalf, assist you in submitting the necessary papers, and make sure everything runs as smoothly as possible.

We can provide a tax investigation service if you want extra piece of mind in the event of an investigation.