HMRC has stepped up its compliance activity as it continues to claw back extra tax revenue.

Being the subject of an investigation can be a worrying experience, so what can you expect if you suddenly find yourself on HMRC’s radar? And is there anything you can do to make sure that an investigation runs smoothly?

Can you prevent an


Businesses can be selected for a tax or VAT investigation at random, so they are never completely avoidable.

However, inconsistencies or delays in producing returns or payments may attract HMRC’s attention, which could mean that they are more likely to investigate your business.

As good practice, you should file returns promptly, pay tax and VAT on time and maintain good business records.

What should you do if an inspector calls?

Tax enquiries can vary in length and complexity.

Depending on the nature of the enquiry, they have the potential to be resolved by a telephone call, but they can also be much more time consuming and disruptive to your business.

HMRC can also agree to change its approach to compliance checks that relate to corporation tax and income tax.

Aimed at reducing the burden on business owners, the Single Compliance Process (SCP) will introduce a single framework with four different levels of approach that correspond to the level of enquiry needed.

Do not panic

It is possible that you have not done anything wrong and HMRC has selected you at random.

If you have been chosen for investigation, you will usually be notified by letter.

This enquiry notice should tell you whether HMRC would like to examine a certain aspect of your business, or conduct a full enquiry. Full enquiry letters are usually easy to distinguish as they are lengthy and will query all aspects of your accounts.

Seek professional advice

It is important to gain professional advice from the start.

You will most likely be asked to submit your accounts or any other business records to HMRC, for them to assess your compliance with tax rules.

Check which documents are being asked for and consider whether they are necessary to judge the accuracy of your business accounts. Technical questions from HMRC regarding compliance with tax rules can then follow.

When a meeting is required

Individuals are often asked to attend a meeting with HMRC after submitting the relevant evidence.

An accountant can advise whether there is merit in agreeing to a meeting.

In preparation for the meeting, you can ask for an agenda ahead of time, as well as the estimated length of the discussion.

During the meeting, it is possible to request details of any errors that HMRC has found and try to ascertain which areas of your business pose a concern, so that you are able to assess the relevance of any subsequent questioning.

The outcome

Once HMRC has reached its conclusion, you will be sent a written closure notice detailing the decision. You have a right to appeal, to the First Tier Tax Tribunal, against this decision.

We can assist with all aspects of HMRC investigations and disputes.

Mark Thompson can be contacted on 01573 224391 or should you require guidance.