No matter how careful you are with your tax affairs, there’s no escaping the possibility of a tax investigation.
You could be the world’s most responsible person when filing your self-assessment, but the fact that HMRC randomly selects individuals to investigate is something you can’t escape. And to make matters worse, an investigation can cost you considerable time and money, as even the most basic tax investigation can cost several thousands of pounds in fees and last for over a year!
But there are ways of avoiding all that emotion and hassle. Instead of being faced with terror and denial, or anger and regret, surviving an investigation can often come down to whether or not you are covered by insurance, and that’s where we step in. We’re your best line of defence which is why we offer a fee protection service (so if you are investigated, your fees are covered).
In order to give you peace of mind, we’ve published some tips on surviving a tax investigation, so that you can save stress, time and professional costs if you become the target of an enquiry.
1. Stay calm
Whilst we appreciate being the centre of an investigation can be a stressful ordeal, remaining calm during the whole situation can be a huge benefit to you. With a composed mind-set, you will be able to make more informed decisions and look at the situation objectively, because the reality is that you will be going through a very complicated situation.
You will also be in a much better position if you have someone experienced in resolving investigations on your side, because they will know how the taxman operates and will be able to provide you with advice during the course of the enquiry.
2. Collate your evidence
Evidence can be the difference between a good and bad investigation. If you purposefully conceal documents, HMRC might think you have something to hide and if you didn’t keep records to begin with, you will need to obtain replacements (such as bank statements) and work with an advisor to fill any gaps you might have.
Collating your evidence also means you will be working to deadlines, which is where it’s important to not over-promise or under-deliver. If you cannot meet a deadline, you are best explaining your situation to HMRC and agreeing a revised timetable, as missing deadlines can often put you in a far worse situation.
Similarly, if at the end of an investigation you have to pay an amount over a period of time, make sure to set a realistic goal and agree this with the taxman. If you miss a pre-agreed payment, there would, in all likelihood, be serious consequences.
3. Be prepared and be honest
Being prepared and honest throughout the process can make or break your investigation, so it is important to be upfront with HMRC and plan carefully for any meetings. Being prepared means you are ready to take action when needed. It also positions you as helpful if you are able to give HMRC access to records, allowing you to make a full disclosure during a meeting.
Similarly, the phrase “honesty is the best policy” rings true in situations like this, because explaining where things went wrong is essential. If you fail to do this, it can often lead to increased penalties and possibly a criminal investigation if and when your full story emerges.
4. Never assume
This is often a mistake people under investigation make. Just because your neighbour or your friend is unaware of your offshore bank account doesn’t mean HMRC isn’t aware. They have access to mass amounts of data and can obtain more from third parties across the world if they need to. So, for example, if an error is found in your tax return, you shouldn’t assume that it’s the only error HMRC is interested in, because they will in all likelihood want to check whether the same error has occurred previously.
How can we help?
With tax investigations being opened into anyone and everyone, an enquiry can come at any time. Whether you’ve had unusual fluctuations, undisclosed accounts or random spending, there’s no escaping an enquiry, but with our service, you can eliminate the stress and escalating costs!
As your dedicated accountant, we’re your best defence if HMRC states its intention to investigate your tax returns. Our fee protection service means we will act as the translators for the many complicated questions the taxman may ask you, as well as managing the entire conversation and helping you submit any required information.
This service means you minimise the impact on your business or personal life, and for limited companies and partnerships, the fee protection service provides inclusive cover for all relevant individuals. So, if your business subscribes to the service, all of your directors, partners, and their spouses and company secretaries will also receive representation during an investigation.