There are few things less welcome than a tax investigation. But if HMRC believe they need to carry out a tax investigation on your business, the first communication you will receive is a formal notice advising that a tax investigation is due to start. Naturally, many people find this rather daunting and to add to the stress, HMRC don’t need to give a reason for the tax investigation.
But don’t panic. If you have an accountants, let them know immediately.
The HMRC notice will give you a deadline by which to respond. Usually this is between 30-35 days, though may be longer depending on the type of business being investigated. And your response needs to be in writing. HMRC tax investigations happen for a variety of reasons, including but not limited to:
– if your business primarily trades in cash
– omissions on your tax returns
– tax returns filed too late
– tax returns amended – begs the question why?
– you might be in a HMRC target area
– you might have injected capital into your business and it is not clear where that cash came from
– you might not be taking any drawings from your business and may need to provide evidence of how you are receiving an income
– failure to respond to other letters from HMRC
Without question, the best course of action you can take is to co-operate fully. This may include the submission of all records maintained by your business for the year of enquiry, and will vary depending on what is being investigated. As a minimum, you will need:
– bank statements
– cheque books and paying in slips
– VAT records, if applicable – credit card statements
– payroll records
– purchase invoices
– expense receipts
– sales invoices / till rolls
HMRC tax investigations can take many months and if you don’t comply, HMRC can issue a Schedule 36 FA 2008 information notice. This orders the production of documents and particulars to HMRC. If you receive a Schedule 36 FA 2008, we strongly advise you to seek expert accounting advice and taxation advice.
For an informal chat, why not contact Chris.Monks@affordbond.com or use the contact form here on our website and we’ll call you black. Above all, don’t ignore any letters from HMRC. Act early and get help from expert accountants experienced in dealing with HMRC.