HMRC investigations and enquiries into individuals and their businesses are stressful, time consuming and costly. HMRC has publicly stated that they are under instruction to increase collection of unpaid taxes and have invested significant resources to achieve this aim.
While the press focuses on the tax strategies of larger multi-national corporations, HMRC has much wider targets and whatever the size or type of business or the amount of or size of any personal wealth, it can raise enquiries to ensure tax compliance.
HMRC has the power to raise an investigation or enquiry for a number of reasons. It is therefore important to seek professional advice as quickly as possible to ensure that the matter is brought to a swift conclusion and a favourable outcome is obtained.
There are a number of different levels of HMRC enquiry:-
- Random – These are enquiries generated by HMRC’s computer system;
- Local office enquiries – these tend to be aimed at specific entries on an individual’s or a company’s tax returns or accounts;
- Taskforce review of what HMRC regard as a “high risk” industry. These tend to focus on cash trades;
- Residence enquiries – HMRC are focusing more and more on individuals who claim to have left the UK;
- Tax Avoidance arrangements – sometimes referred to as Code of Practice 8 or Civil cases;
- Offshore assets – there has been much made of HMRC’s Offshore Disclosure opportunities that encouraged taxpayers to make good any tax on hidden offshore assets in return for a much reduced penalty; and
- Serious Fraud – cases where there is evidence of evasion sometimes referred to as Code of Practice 9, and
- Criminal Investigations – cases where there is evidence of criminal.activity such as Money Laundering or VAT carousel fraud