Navigating HMRC Tax Investigations

In my podcast episode with Kevin Igoe, the Managing Director of PFP and Chairman of the UK Tax Investigations Conference, we delved deep into the intricacies of HMRC tax investigations. This article aims to provide you with a summary of the comprehensive insights discussed and the key takeaways from our conversation, offering valuable information in navigating the complexities of tax investigations.

HMRC emphasizes that tax investigations are conducted to ensure the correct collection of taxes. However, some believe that the aim is to maximize revenue, often seeking interest and penalties in addition to taxes owed.

Contrary to popular belief, the medical profession is not exempt from tax investigations. Common enquiries include full examinations of self-assessment tax returns, aspect enquiries that fall just short of a full enquiry, payroll investigations, and VAT visits for those registered. Our clients should be aware that their records, including expenses and income items, can be thoroughly scrutinised.

Various factors can trigger HMRC investigations. Deviations from expected expense patterns, discrepancies in financial data, and even random selections can prompt enquiries. Mistakes or errors in tax returns, as well as undisclosed information, increase the risk of investigation.

HMRC's Connect system consolidates over 20 billion pieces of information, connecting individuals through a vast web of data. This system enables HMRC to access diverse information, from bank accounts and transactions to overseas travel, ensuring a comprehensive understanding of individuals' financial situations.

It is a misconception that one must commit an offense to undergo a tax investigation. Innocence does not protect against enquiries, and even simple errors or corrections can elevate the risk.

While initial enquiries into self-assessment tax returns must be launched within 12 months, HMRC can investigate tax returns for several years. In cases of discoveries or suspicions, they can look back up to 20 years.

A noteworthy case involved a medical partnership undergoing a full enquiry, including a payroll check and examination of furlough schemes. Despite an 18-month dispute, the partnership settled for nothing, emphasizing the importance of professional representation.

Given the growing budget deficit, we anticipate a surge in HMRC investigations. A politically expedient approach to tax evasion, coupled with a potential hardening of HMRC's stance, could lead to an increase in enquiries across all sectors, including the medical profession.

RBP Tax Investigation Service

The RBP tax investigation service proves invaluable in protecting clients during HMRC investigations. Professional representation and expert advice ensure that clients have the best defence against disputes, offering peace of mind and cost-effective solutions. If you are not currently enrolled in this service, please contact me for further information.