In the UK, the biggest entity relating to fraud investigations is Her Majesty’s Revenue and Customs (HMRC).
If you find that your company is about to undergo an investigation from HMRC relating to tax, it is all too easy to panic. But as the following article describes, there are some instances during which this may be simply routine, or there may be an underlying motive behind the investigation. Either way, it is important to seek the appropriate legal advice from a fraud solicitor.
In the following guide, a few of the points relating to an HMRC investigation will be explored, so you can have a better idea of what to expect from this process.
What starts an investigation?
An HMRC compliance check is typically triggered when figures that were submitted on a tax return appear to be false or wrong. For example, if you own a small company, and you make a large claim for VAT, this will likely cause an issue with the tax return. There are other instances during which a tax return may be investigated, such as HMRC receiving a tip-off, your company routinely taking cash payments, your tax returns being continually filed late, the costs of your business being extremely high, or your tax returns being inconsistent. Or perhaps there has been a lot of fraud in the area in which you work, and checking your tax returns is simply part of a routine.
What are the possible outcomes?
What happens after an HMRC investigation will depend on what is found. Some of the most common outcomes include the taxpayer or your company receiving a tax rebate with interest. If you are found to have been underpaying your tax, you will need to pay it within 30 days. If there is evidence of deliberate wrongdoing on your end, you will be required to pay a penalty and HMRC may escalate the case to criminal levels, during which you will be required to attend court, and there may even be a custodial sentence.
Different investigation types
There are different investigation types, some of which are simply routine; these types are known as random checks, and they occur when HMRC simply picks a business to investigate. A full inquiry is when HMRC becomes concerned with your taxes and believes that there is a significant error in a tax return. An aspect inquiry usually points to a genuine mistake or misunderstanding rather than a deliberate attempt to evade taxes.
What to expect
When your business is being investigated by HMRC, you can expect there to be lots of letters and phone calls, and you may need to find a lot of paperwork! If it is a full inquiry, this paperwork may go back as far as 20 years. In this case, you will need the help of a solicitor to ensure that all of it gets across on time and that there are no breaches of the terms of the investigation.
It is always wise to seek help when you find out that you are being investigated by HMRC, so contact a solicitor who has experience handling fraud for more guidance.