A HMRC tax investigation has the potential to be quite costly and stressful in relation to the penalties and time required to resolve the issues. An investigate is likely to become quite expensive and disruptive which can last a good 12 months or more to investigate and cause significant issues with the day-to-day running of the business. The reason for an investigation can vary from a specific mistake or error in a completed return to a tax payer being chosen completely at random.
Some of the most noticed reasons for the HMRC to start an investigation include records that differ vastly from similar business in the same industry, using round numbers on all entries and not the exact figures, unexplained or unusual fluctuations in the declared amounts, low-quality record keeping, a tip-off from a tenant or disgruntled employee, and certain high risk areas of business, such as construction or jobs that are likely to involve cash payments. Also, about three percent of investigations are started on a purely random basis.
If you are in a position of being investigated by the tax authorities you will need to take the right action to make certain this situation is resolved as effectively as possible.
1) Remain in Control: On first getting the notification of being investigated you need to avoid getting into a panic and stay calm. Even in those situations where you have made errors on the tax return, you might still find that it is possible to rectify the issues by making any payments due as soon as possible. Unless a tax return features many intentional errors of a significant size, there are very few instances where a case ends with a custodial sentence.
2) Seek Professional Advice: At an early stage of the proceedings it will help to hire the services of a specialized tax investigation service to guide you through the entire process. They are able to give advice on each stage of the investigation and this over the long-term will make things easier to handle and more cost-effective.
3) Tell the Truth: When it comes to providing any requested information or meeting with an investigator, you really want to remain truthful and provide the necessary information. Lying to the HMRC investigators is only likely to course more problems over the course of the tax review. Also, you want to make certain to be fully prepared for any in-person meeting and offer any evidence requested.