While it’s far from uncommon for UK businesses to occasionally face a tax audit, being under a tax investigation is a common signal that HM Revenue and Customs (HMRC) believes that your business may have tax reporting issues.
Dealing with a tax investigation can be a stressful experience. If your company is currently being investigated by HMRC, it’s important that you talk to an experienced professional to learn about the options that are available to your company.
Below, we’ve explained how tax investigations work, why HMRC may choose to investigate your company and how you’ll be notified of an investigation. We’ve also provided information on what you can do if you’re currently being investigated for tax-related issues.
What is an HMRC Tax Investigation?
All businesses in the UK are required to pay certain taxes, including value-added tax (VAT) and, for companies with employees paid through PAYE, Pay As You Earn (PAYE) taxes, corporation taxes and national insurance contributions.
HMRC routinely audits UK-based companies to ensure that all relevant taxes are paid in full and without error. Tax audits are typically thorough and closely monitor areas in which tax errors are most frequently made.
Most tax audits finish without issue, particularly when a business has paid its taxes properly and without significant mistakes. Audits are typically infrequent, with most businesses only audited a few times a decade or, for many businesses, even less frequently than this
If HMRC suspects that your business hasn’t reported its earnings or paid its taxes accurately, it may audit your business more frequently in order to identify errors or evidence of deliberate tax underpayment.
Notification of a Tax Investigation
If HMRC has decided to launch an audit or investigation of your business, you’ll be informed in advance. An HMRC tax agent may visit your business to inform you that your business is being audited. During this visit, they may ask to review your business’s tax records.
If your business is subject to a tax investigation, you’ll typically receive a notification letter from HMRC informing you that your business is being investigated.
In either case, it’s important to seek expert advice. As specialists in business taxes and finance, you can contact us to learn more about your best options for responding after you receive a tax audit visit or tax investigation notification letter from HMRC.
Why Has HMRC Targeted Your Business?
Most tax investigations occur when HMRC has reason to believe that your business isn’t paying its taxes in full. Common issues that can lead to a tax investigation include:
- Filing tax returns and paying taxes late, especially when this occurs frequently
- Inconsistencies or unusual differences between your tax returns
- Using offshore bank accounts or other signs of money being transferred out of the UK
- Operating a business that frequently takes cash payments
- Operating a business in an industry that’s been identified as being at high-risk for tax evasion and/or income misreporting
- Making errors in your tax payments that need to be addressed and corrected
- Receiving income from real estate
- Reporting abnormally high costs compared to similar businesses in your industry
In some cases, HMRC may launch a tax investigation after being tipped off about your business by a customer, supplier, employee or other party that provides evidence of tax-related issues.
What Should You Do if Your Business is Investigated?
If your business is being audited or investigated by HMRC, it’s important that you seek expert advice as quickly as possible.
Tax investigations can last for several months. They’re often stressful experiences, making it important that you have a team of qualified professionals on your side to help you throughout the process.
If your business is subject to an audit, we can help you to provide the necessary records and other information to HMRC accurately and in a timely manner, potentially lowering your risk of facing penalties.
If your business is subject to a tax investigation, our experienced team can provide actionable, personalised advice to help you effectively respond to communications with HMRC and move forward throughout the investigation process.