HMRC Investigations

The number of investigations HMRC will conduct in the years ahead will increase significantly.

This is down to Artificial intelligence. Using Ai will vastly speed up the review of your bank accounts, lifestyle patterns posted on social media and comparison to similar business. It will give inspectors far greater tools to analyse and investigate returns submitted.

An investigation will happen for 1 of 3 reasons.

-       A tip off.

-       HMRC do not like what has been disclosed to them, or indeed you haven’t disclosed anything and are very late with filing a return.

-       A totally random selection.

It has been estimated 93% of investigations happen under the first two categories.

The first thing you must do when notified of an investigation is to tell the truth. In 99.99% of cases from that point, the worse that can happen to you is the payment of money to HMRC. There is a true story about the jockey Lester Piggott. He was under an investigation and ended up owing several million pounds in back tax, a huge amount at the time. When the settlement meeting came, he proceeded to give HMRC a cheque for the full amount but from an account he hadn’t disclosed to them. As a consequence of that, not because he owed several million pounds in tax, he went to prison for 3 years

How long an investigation takes depends on the depth. If it’s an aspect enquiry e.g. a specific thing is queried then it could be over in an exchange of letters but if it is a full enquiry on a particular tax year and that enquiry then spreads to other years, it will likely take months.

Unfortunately, if the investigation leads to more tax being paid, a penalty is charged which could be very significant. The amount will vary between 10% to 100% of the tax due depending on a range of factors, especially how cooperative, timely and honest you have been in dealing with the investigation process.