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tax investigations

What are tax investigations?

HM Revenue & Customs (HMRC) are showing an increasing propensity to launch investigations where they believe that there is a risk of tax being lost. In general terms these types of enquiry are entered into where the following factors are present:

• Cash businesses;
• Failure to comply with tax law (the late submission of returns, late payment of taxes);
• Unexplained capital accumulations;
  
• Insufficient income to meet expenses (living beyond your means);
  
• Third party information (from banks, stockbrokers, etc);
  
• Information from other tax gathering departments (the VAT office, PAYE Audit or compliance visits).

Following the amalgamation of the Inland Revenue and Customs and Excise into HMRC the flow of information between the two authorities has been enhanced. Inland Revenue have always passed information to the VAT office and vice versa, so it is likely that an investigation in one area of your tax affairs could lead to another. Tax investigations, as far as direct taxes are concerned, can broadly be split into two categories:

Aspect enquiry - HMRC will be looking at a specific “aspect” of your direct tax affairs. This may be in relation to a new source of income, or a disposal of assets, but will not take into account the wider details of your affairs. Such enquiries usually arise as a result of taxpayer misunderstanding, or errors in their tax returns rather than tax fraud or evasion.

Full enquiry – This type of investigation will take into account all of your tax dealings, and may well be looking back over a number of years to uncover the full details that HMRC are concerned with. Such an enquiry is usually launched when HMRC feel that the tax lost is significant and pervades the taxpayer's entire dealings with them.

It should be noted that if HMRC have made a discovery concerning your tax affairs they have statutory powers to look back over 20 years. This can cause great problems for the taxpayer, as there is only a requirement to keep records for a minimum of six years. In view of HMRC’s powers and the multiple sources of information at their disposal, dealing with an investigation can be a very time consuming, costly and above all stressful business. It also requires a higher level of expertise by your professional advisers. mfg put a dedicated and experienced team of tax professionals skilled in dealing with the tax authorities at your disposal.

Our Expertise

Our team is headed by tax partner Alan Neal (who is both a qualified solicitor and chartered tax adviser) and consists of chartered tax advisers, solicitors and accountants all of whom have been involved in a wide range of cases covering the full spectrum of direct taxation. We provide the highest standard of professionalism in terms of both our advice and expertise in handling HM Revenue & Customs enquiries into your affairs.

The service we provide is tailored to the needs of each client, from an advisory service right through to conducting the entire investigation on your behalf and you can be assured that we will always serve your best interests. If you or perhaps one of your clients would like to use our expertise in this somewhat complex and distressing area of taxation, please contact the tax division.

If you would like to find out more, please contact us.

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Revenue to pour quarter of its £4bn budget into battle against tax evasion

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