A tax investigation is carried out by HMRC when they have reason to believe that the tax return or accounts submitted by a sole trader, partnership or company are inaccurate in some way. Most tax investigations by HMRC are carried out because they have concerns about the truthfulness of a tax return and/or a set of accounts and want to check that everything is legitimate and above board, and that you have paid the correct amount of tax. You can also be selected for a tax investigation at random.
A tax investigation should not be taken lightly, it can be very time consuming and can seriously interrupt the running of your business. Often the inspectors will go into great detail so you have to be prepared for them to go through every single bit of your paperwork with a fine tooth comb, and be prepared for them to be very intrusive.
If your accounts and tax return are found to be legitimate then there will be no penalties for you to pay. If there has been genuine mistakes made and you are honest then the penalties will be smaller. If the investigators discover obvious tax evasion however, then the penalties can be quite severe, extreme cases even resulting in a prison sentence.
If you would like any further information or advice on investigations carried out by HMRC then please do not hesitate to phone or email us, or alternatively, you can simply use the live chat link available.
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About The Author
MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.