After a Tax Investigation

To plan for your personal financial affairs in the most effective way, we take a joined-up approach considering the tax, legal and financial planning aspects of every scenario.

The needs and challenges of any business, and business owner, constantly change, and likewise, business advice should be an ongoing process rather than a single moment in time.

Our forensic accounting specialists explore and analyse information to help with processes including asset tracing, dispute resolution and fraud investigation.

When an investigation ends, HMRC will tell you its conclusions and what, if anything, is owed. This is the time to check that the figures are right, decide whether to challenge them, and agree how and when to pay.

The outcome

HMRC will issue a closure notice or a settlement letter. There are three main possibilities:

no change is needed and the enquiry closes
you have overpaid, and HMRC repays the tax with interest
you have underpaid, and HMRC asks for the tax, interest and any penalties, usually within 30 days

In more serious cases, matters may be settled by a formal contract with HMRC.

Appeals

If you disagree with HMRC’s decision, you normally have 30 days to appeal. You can then ask for a statutory review by an HMRC officer who was not involved in the case, take the appeal to the First-tier Tribunal, or both. Alternative dispute resolution, using an HMRC mediator, can also help resolve disagreements without going to tribunal. Our Tax Dispute Resolution team can advise on the best route.

Paying what is due

If you cannot pay in full, HMRC may agree a Time to Pay arrangement, allowing you to pay by instalments. Interest continues to run on the outstanding balance, so we help you propose a realistic plan that HMRC is likely to accept.

Penalties after the enquiry

Penalties for careless errors can sometimes be suspended for up to two years if you agree to conditions designed to improve your records and systems. If you meet the conditions, the penalty is cancelled. Where deliberate errors involve more than £25,000 of tax, HMRC can publish the taxpayer’s details unless the maximum reduction for disclosure was earned, and some taxpayers may be monitored more closely under the Managing Serious Defaulters programme.

If HMRC failed to use information you gave it

In some cases HMRC may agree not to collect income tax, capital gains tax or Class 4 National Insurance where arrears arose because it failed to act on information provided by you, your employer or the Department for Work and Pensions, and you reasonably believed your affairs were in order.

Looking ahead

One investigation does not automatically lead to another, but repeating the same errors will attract attention. Good record keeping, digital bookkeeping in line with Making Tax Digital, and fee protection insurance all reduce the risk and cost of future enquiries.