What are the chances of being investigated by HMRC?

Are you nervous about your tax affairs? Perhaps you’re simply curious. Perhaps you know you have errors in your tax returns. Or perhaps you’ve already been notified that you’re under investigation and you want to know how and why.

In this article, we’ll discuss what the chances are that you’ll be investigated by HMRC, how HMRC chooses who to investigate, and who can be investigated by HMRC.

What are the chances of being investigated by HMRC?

HMRC couldn’t possibly perform an audit of every single company, so they only carry out investigations where they find concrete potential issues in the data.

This means that as long as you have prepared all your tax documentation correctly, there is statistically very little chance that you’ll be investigated by HMRC.

That said, around 7% of tax investigations are thought to be selected at random. The investigation, however, cannot proceed unless they find actual anomalies to warrant further investigation. They can only investigate a certain number of years depending on the severity of the anomalies.

How does HMRC choose who to investigate?

HMRC has many ways of finding out about undeclared income, from tip-offs to information flagged using their sophisticated Connect software. Generally, you’ll be flagged for investigation because:

• They’ve found omissions/mistakes in your tax returns.
• You work in a sector HMRC are currently targeting.
• Your financial data varies significantly from the norm in your industry.
• You’ve got unusual financial behaviour like a large loss of earnings or a large one-off transaction.
• You consistently file your tax returns late or make amendments often.
• You’ve been selected completely at random.

Who can be investigated by HMRC?

Anyone who is responsible for reporting or paying taxes, no matter how little the figure, can be investigated by HMRC. This includes:

• Individuals
• Self-employed
• Business owners
• Partnerships
• Contractors and intermediaries
• Landlords
• Importers and exporters
• People with offshore interests
• Charities and non-profit organisations
• Trustees
• Executors of estates
• High net worth individuals

Concerned about an HMRC investigation?

Whether you’re simply worried about the potential of an investigation or are currently at the centre of one, it’s never too early to seek legal counsel. The tax fraud solicitors here at Holborn Adams can help you get your tax affairs in order and negotiate the best outcome with HMRC.

Many people in your position reach out to accountants for help. We strongly recommend instructing a solicitor so you are covered by “legal privilege”, meaning the solicitor isn’t allowed to share anything you tell them. Accountants legally have to report tax avoidance to HMRC. Once you consult with them, you have a short window to work out the best course of action.

A solicitor can instruct an accountant on your behalf, meaning the accountant is also covered by legal privilege. This gives you the breathing space and both the tax and legal expertise to work out what the best approach is to take when you deal with HMRC.

Please get in touch with Holborn Adams today – the earlier you reach out to us, the better the end result.

Holborn Adams