What happens if I am targeted by HMRC for a tax investigation?

Being targeted with an HM Revenue & Customs (HMRC) tax investigation can be a very daunting experience, which is why it is wise to seek specialist advice at the earliest possible opportunity.
Worryingly, any individual or business can be targeted by the tax authority at potentially any time – and HMRC does not even have to provide a reason for launching an investigation.
In light of this, it is wise to take out fee protection insurance against HMRC enquiries, which will cover any professional fees you may incur in instructing an accountant to help you resolve a previously-unforeseen investigation.
What does the investigation process involve?
If you have been selected for investigation, HMRC will write to you to inform you of the impending enquiry, usually requesting that you respond within 30 to 35 days.
Throughout the investigation process, it is important to respond to any written requests received from HMRC within good time, to ensure that hefty penalties are avoided.
There are two main types of HMRC investigation:

  • An ‘aspect enquiry’ – which may only focus on an individual aspect of your tax return and is likely to be resolved much more quickly.
  • A ‘full enquiry’ – which is more detailed and may require you to provide HMRC with full and comprehensive business records for the entire year of enquiry.

Depending on the type of investigation you are facing, it could take anywhere between three and 18 months to resolve.
This is why it is wise to appoint an accountant to act on your behalf with a view to resolving the matter promptly and bringing it to a timely and satisfactory conclusion.
How can I benefit from fee protection insurance?
Gone are the days when a tax investigation was launched by HMRC to check whether the right amount of tax was being paid at the right time. According to HMRC’s current Business Plan, the primary objective now is to maximise revenue – and this has largely changed the tone and approach adopted by tax inspectors.
As mentioned previously, any business or individual can be targeted with an enquiry at any time – which is why it pays to take out fee protection insurance. This type of insurance will cover any professional fees you may incur should an investigation arise.
Whether into your business accounts, or your own personal tax affairs, investigations have become more aggressive and time-consuming and can take many months, even years to conclude.
Aside from the time lost digging out historical information and attending meetings with tax inspectors, the financial costs in mounting a defence soon add up. This is why it is wise to make sure you are protected from the very outset for peace of mind.
If you are facing an HMRC investigation or are interested in securing fee protection insurance to ensure your professional costs are covered should one arise, speak to Grunberg & Co today.     

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