HMRC Investigations

If you run a business or work for yourself (freelancer, self-employed etc. . .), then you'll want to know what happens during an HMRC investigation. In this brief guide, we'll talk about what an investigation by Her Majesty's Revenue and Customs is, what happens during it and how to avoid being investigated in the future.

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What Triggers An Investigation

Without a double, the leading reason for triggering an investigation are mistakes. If your tax returns are missing information or it's not accurate, then processing your returns might not be easy. This can trigger an investigation.


Sometimes nothing triggers an investigation. HMRC is known for randomly selecting businesses to investigate, but in most cases the businesses are very large. However, small businesses are not excluded from being randomly selected, therefore it can happen to anyone.


If you only brought in a relatively small income last year and this year you've been massive gains, then the HMRC might launch an enquiry. The same goes if you have always made a modest income and then a huge jump in income occurred from seemingly out of nowhere. This doesn't mean the agency thinks you did something wrong, but they just want to make sure of this.


To sum up the above, the key triggers are:


. Mistakes & consistencies

. Random selection

. Large annual changes


What Happens During An Investigation

The HMRC will request info from you, and you will be required to provide them with that info. The good news is that you can argue that the reason they are investigating you is incorrect, but then they will decide what the next step is. Generally speaking, minor discrepancies are the main reasons for investigations, and if that's the case with you, then things will usually be wrapped up quickly.


However, there are instances when an extensive investigation will be conducted. This is when an agent might meet with you face-to-face and will ask you questions. They may conduct interviews over the phone too.


The outcome will be revealed to you once the investigation has been completed. The agency may take no action, tell you that you underpaid tax, overpaid tax or committed fraud. If it's serious, like fraud, then they may pursue criminal charges against you.


How To Avoid Being Investigated In The Future

You can double-check your tax returns before filing them. Ensure every single piece of info is correct. Also, hire a tax professional to look over your taxes. Many professionals guarantee you their accuracy and will speak on your behalf if you're investigated. Just make sure you do not deliberately try to mislead the HMRC in anyway, as doing so is a quick way to trigger an investigation.


When you become the target of an HMRC investigation, you'll want to remain calm and realize that there are a number of reasons why this is happening. It will also be wise to hire an attorney or receive professional help. Remember, sometimes an investigation turns up nothing, but in some cases it is always best to have a solicitor representing you.