TAX INVESTIGATION PROTECTION

Award Winning
London-Based
Immigration Tax Advisors

HMRC ( THE UK TAX AUTHORITIES) TAX INVESTIGATION PROTECTION 

Subject to specific time constraints, the UK tax authorities may launch inquiries to investigate the correctness of a tax return that has been filed. 

HOW LIKELY ARE YOU TO FACE  A TAX PROBE FROM THE UK TAX AUTHORITIES?

Factors that may increase the likelihood of an inquiry or investigation include: 

  • You file your tax returns late, pay your taxes late, or make mistakes that need to be corrected. 
  • Inconsistencies or significant variances exist between distinct returns, such as a significant drop in revenue or an increase in costs. 
  • For a company in your industry, your costs are unusually high. 
  • You have bank accounts in other countries. 
  • Property revenue is a source of income for you. 
  • You work in a high-risk industry, such as a business that accepts cash payments on a regular basis, or an industry that the UK tax authorities has chosen to pursue. 
  • Your tax returns don’t reflect how busy your business is or what your standard of living is. 
  • A tip is received by the UK tax authorities. 

DURING A TAX INVESTIGATION, THE UK AUTHORITIES MIGHT LEARN A LOT ABOUT YOU

The UK tax authorities can find out the following information about you: 

  • Land Registry records are used to determine which properties have been purchased and how much stamp duty has been paid. 
  • DVLA Provides information on cars bought and owned by individuals. 
  • The UK tax authorities receives information from institutions in more than 60 countries about UK and international bank accounts. 
  • Internal tax papers – systems that show how much tax you’ve paid, applicable VAT registrations, past tax inquiries, and tax returns from previous years (or absence of them). 
  • Earnings from any employer, including those for which you have worked on a part-time or ad-hoc basis. 
  • Online markets – ordinary merchants can be found on websites such as eBay and Amazon. 
  • Social media – The Connect system may also look at information from public social media accounts, such as Twitter, Facebook, and Instagram. 
  • You will be leaving and returning via UK airports, according to UK border information. 

Even if the UK tax authorities does not have access to the information, the Fraud Investigation Service can use “information notices” to compel you and third parties to supply it. 

The information they want will be determined by their investigation; the letter will state exactly what the UK Tax Authorities requires. 

However, it is very important to understand that the UK Tax Authorities will often ask for documents that you are not legally required to provide. In fact, the UK Tax Authorities have been known to request documents or records beyond those you need to keep. 

WHAT RECORDS MIGHT THE UK TAX AUTHORITIES ASK FOR?

It depends on what exactly they’re investigating but the UK Tax Authorities HMRC might require any of the following or more: 

  • Bank statements 
  • Credit card statements 
  • Sales invoices 
  • VAT records 
  • Payroll records 
  • Quotes from third parties 
  • Expense receipts 
  • Copies of emails and correspondence 

HMRC TAX INVESTIGATION: WHAT YOU NEED TO KNOW

A telephone and/or appointment may also be requested to clarify certain points, but again, you would be wise not to agree to an appointment with the UK Tax Authorities until you have received professional advice from tax consultants. 

THE UK TAX AUTHORITIES TAX INVESTIGATION TIMELINE

  • The UK tax authorities have 12 months from the moment they receive your tax return to open an investigation.  
  • If minor adjustments are necessary, the UK Tax Authorities may not investigate previous returns. 
  • Earlier years will be looked into, if there are any larger adjustments. 
  • A maximum of 6 previous years can be looked at if there is a careless error. 
  • If the error was deliberate, the UK Tax Authorities have the power to go back 20 years. 

PENALTIES

  • If an adjustment is needed to your tax or VAT return, a penalty may be charged. 
  • The error will determine how steep is the penalty. 
  • If it is clear that you’ve taken care with your tax return but made a genuine mistake, the penalty is less severe than if you purposefully change the tax return. 
  • An honest mistake, you’ll probably just be asked to pay the rest of the tax within 30 days of the UK Tax Authoritiesdecision, they might also add some interest. 
  • If deliberate tampering has been discovered then there could be a high penalty. 
  • You’d be looking at another 15% – 100% on top of your payment but it can be anything up to 300%. 
  • A criminal prosecution might occur if it’s deemed severe enough. 
  • This is where it pays to be helpful; if you cooperate with the enquiry, or spot the error and disclose it voluntarily, the penalty will in all probability be reduced. 
  • If you don’t agree with a decision, you have 30 days in which to appeal. 

The team of tax advisors of Expat Ltd will help you go through a tax investigation from the UK tax authorities. Moreover, we offer a tax investigation protection insurance fee for £300 per annum.