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Tax investigation protection is a type of insurance that covers the costs of professional fees in the event of a tax investigation by HM Revenue and Customs (HMRC).

It can provide peace of mind and financial protection in case of unexpected tax investigations, which can be time-consuming and costly.

What are the risks of tax investigation?

The risks of a tax investigation can include fines, penalties, interest charges, and even criminal prosecution in some cases.

It can also be a time-consuming and stressful process, requiring extensive documentation and potentially leading to a damaged reputation or loss of business.

It is important to take steps to minimise the risk of a tax investigation, such as keeping accurate records and seeking professional advice when necessary.

Who is most at risk of tax investigation?

Anyone can be selected for a tax investigation, but certain groups are considered to be at higher risk. These include self-employed individuals, high earners, those with complex tax affairs, and those who have previously been investigated.

However, it’s important to note that being in one of these groups does not necessarily mean you will be investigated. HMRC regularly undertakes random enquiries, so you could be picked out for no particular reason.

How long does a tax investigation enquiry take?

The length of a tax investigation can vary greatly depending on the complexity of the case and the cooperation of the taxpayer.

Some investigations can be resolved within a few weeks, while others can take several months or even years to complete.

It is important to work with a qualified tax professional to ensure that the investigation is handled efficiently and effectively.

How long can HMRC investigate your tax affairs?

HMRC has the power to investigate your tax affairs going back up to 20 years in cases of serious tax evasion or fraud. However, for most cases, the time limit is much shorter.

Generally, HMRC can investigate your tax affairs for up to 4 years after the end of the tax year in question. This means that if you filed your tax return for the 2019/20 tax year on time, HMRC has until April 2024 to start an investigation.

It’s important to note that this time limit can be extended in certain circumstances, such as if you have deliberately concealed information or if HMRC suspects criminal activity.

What are examples of tax evasion?

There are many ways that individuals and businesses can commit tax evasion. Some common examples include failing to report all income earned, claiming false deductions, hiding assets in offshore accounts, and underreporting the value of assets.

Other examples include failing to pay payroll taxes, failing to file tax returns, and using fake social security numbers. It is important to note that tax evasion is a serious offence that can result in severe consequences.

Tax evasion vs tax avoidance

Tax evasion is the illegal act of intentionally not reporting or underreporting income to the government in order to avoid paying taxes. This can be done by failing to report all income earned, claiming false deductions, or hiding assets in offshore accounts.

It is different from tax avoidance, which is the legal use of tax laws to minimise one’s tax liability. Tax evasion is a serious offence that can result in fines, penalties, and even imprisonment.

Why have I been selected for a tax investigation?

There are several reasons why HMRC may initiate a tax investigation. One common reason is if they suspect that you have underreported your income or claimed false deductions on your tax return.

They may also investigate if they suspect that you are involved in illegal activities, such as money laundering or tax evasion. Additionally, if you are selected for a random audit, this can also lead to a tax investigation.

Whatever the reason, it’s important to take the investigation seriously and cooperate fully with HMRC to ensure a fair and timely resolution.

What is a HMRC tax investigation?

A HMRC tax investigation typically begins with a letter or phone call from the tax authority, informing the business or individual that they are under investigation.

The investigation can cover a range of tax-related issues, including income tax, corporation tax, VAT, and PAYE. The HRMC will request access to financial records and other relevant documents, and may conduct interviews with employees or other individuals connected to the business.

The investigation can take several months or even years to complete, depending on the complexity of the case. It is important to seek professional advice and support during this process to ensure that your rights are protected and that you are fully prepared for any potential outcomes.

Receiving notification can be scary but firstly and most importantly, don’t panic. More often than not it is due to nothing more than a minor discrepancy and the case is quickly closed.

There is no guaranteed way to completely avoid a tax investigation, but there are steps you can take to reduce your chances.

These include keeping accurate records, filing your taxes on time, and avoiding any suspicious or unusual activity on your tax returns.

If you are selected for investigation however, all our clients receive our Tax Investigation Protection by default. The benefits of our package include:

• We ensure you receive the best defence to protect your tax position.
• We address the complexities or technical tax questions raised throughout the enquiry.
• We’ll challenge HMRC’s assertions and assumptions head on, establish the basis of the enquiry is correct and ensure your case is handled fairly.
• We’ll handle all communication with HMRC, including letters, phone calls or notices issued.
• We ensure that the tax inspector is requesting only the relevant information and documents, and provide the appropriate supporting evidence.
• We’ll prepare for and attend any face to face meetings with HMRC.

The best part is that our clients do not have to worry about rising costs of time spent dealing with the issues throughout the length of the enquiry.

Whether it’s a PAYE or VAT visit, a technical challenge or a detailed books and records enquiry, our TAX Investigation Protection is designed to get you the best possible results, included in your current monthly fees.

If you’d like to find out more, please get in touch for a no-obligation discussion.

https: www.franksaccountants.co.uk

email: [email protected]

tel: 01937 534242