Being audited or how you may know it – being under HMRC tax investigation is not something any business owner would want to ever go through. A HMRC tax investigation can be a stressful process for any business and unfortunately, you can never eliminate the risk of an audit; however, there are ways that you can reduce the risk.

What is an HMRC Tax Investigation?

HMRC has the right to check your affairs at any point to make sure you are paying the right amount of tax. If at any point you are selected for an investigation, you will receive an official HMRC investigation letter or a phone call in which they will tell you what they want to look at. It is important to note that If you are facing an audit, you will need to provide up to seven years of paperwork to account for all your business expenses. This paperwork can be provided as either physical or digital copies.

What Does an HMRC Tax Investigation Involve?

As part of an investigation, HMRC may ask to visit you in person at your home, business, or your accountant’s office. A penalty will incur if HMRC sends you a notice and you refuse the visit or fail to send the required information. However, if you are seriously ill or going through a grieving process, you will not have to pay the fee. During the investigation, a team from HMRC will thoroughly audit your accounts and may ask you some probing questions as they do this.

7 Reasons HMRC May Select Your Business for an Audit

1. HMRC receives a tip-off
2. Regular mistakes on returns
3. Fluctuate by large margins
4. Years of losses
5. Your figures are inconsistent with industry standards
6. Omission of income
7. You do not have representation (i.e., an Account)

How Can I Lower the Risk of Being Selected for an Investigation?

It is always essential to make sure your records are as accurate as possible. Most checks are triggered by HMRC’s Central Risk team, who use sophisticated data mining tools to spot unusual activity on accounts or trends in particular industries. The most common trigger for an investigation is submitting noticeably incorrect figures on a tax return – so it is worth having an accountant that offers professional advice about your accounts, as well as check over your tax returns before you send them. Here at Outsourced ACC, we offer full support and assistance during HMRC Tax Investigations. Should you need any assistance or advice, please feel free to contact us on 0208496007.

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