What are the odds of being investigated by HMRC?Before self assessment around 1 in 100 tax returns were examined; now the number will be around 1 in 10, possibly even higher as HMRC gains access to new resources. That means that every taxpayer – and that generally means every self employed person – will get inspected within a ten year period.
How likely am I to be investigated by HMRC?On average, tax audits can be expected every five years or so, while only a few per cent of income tax and corporation tax returns are investigated each year. But the frequency of tax audits and the likelihood of in-depth tax investigations increases if HMRC suspects that tax is being underpaid.
What triggers an HMRC investigation?What triggers a tax investigation? Any unusual activity in your tax records or accounts could flag you up for an HMRC tax compliance check.
How far back will HMRC investigate?The HMRC investigation time limit is 4 years if an innocent error is suspected; where mistakes in tax returns are deemed careless or negligent, the window extends to 6 years. Suspicion of deliberate tax evasion warrants an investigation period of 20 years.
What triggers HMRC Enquiry?Information discrepancy: If HMRC comes across any discrepancy in the information provided by you, they may open an enquiry. For example, if your income reported on your tax return is not in line with the information they have received from other sources, such as your employer, they may start an enquiry.
What To Do If You Are Being Investigated By HMRC?
How will I know if HMRC are investigating me?How to tell if HMRC is investigating you. If HMRC is investigating you formally, you will receive a letter explaining that they have started an official investigation and asking for additional information. You will not typically be notified when HMRC is looking into your tax affairs prior to this.
What are red flags for HMRC?As well as incurring penalties the late filing of tax returns can also be seen as a 'red flag' by HMRC, putting the individual concerned at greater risk of a tax investigation.
Can HMRC see your bank account?Does HMRC check bank accounts? Yes, your pay-as-you-earn (PAYE) records and the information you supply on your self-assessment tax return can be used by HMRC to determine how much you earn. That's just the numbers you're providing them with.
Can HMRC check your phone?Transaction monitoring records information about you when you are using HMRC and shared HMRC services. We collect personal data about: the computers, phones or devices you use. the internet connections you use.
How quickly do HMRC investigate?How long the tax investigation process takes will depend largely on how much information HMRC wants to look at. Smaller tax investigations usually take between three and six months, while a full-scale investigation can sometimes take up to 16 months to complete.
Do HMRC go undercover?In the majority of cases fraud and criminal activity will be suspected and warrant further investigation. HMRC will use every means at its disposal where it believes it has the right to investigate undercover in such areas as: There is a deliberate attempt to defraud and or withhold VAT payments.
How to survive HMRC investigation?Seek specialist advice
Specialist advisers, such as ourselves, that have been provided with full details of your affairs can guide you around potential pitfalls to ensure you are best protected. They will also allow you to get ahead of any accusations by HMRC, and should reduce the overall cost of any investigation.
Do HMRC come to your house?They will never visit you at your home or place of work. You can either: pay them what you owe us, if you are able to — once your payment has been cleared the agency will send it to us to credit to your HMRC account.
How common are tax investigations?On average, tax audits can be expected every five years or so, while only a few per cent of income tax and corporation tax returns are investigated each year.
How do HMRC detect undeclared income?There are many ways HMRC can find out about undeclared income. First of all, they use sophisticated software called Connect. This system is designed to analyse large amounts of data and pick up any inconsistencies that could point to tax evasion. From there, HMRC can launch an investigation.
Will HMRC ask for proof of expenses?You do not need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HM Revenue and Customs ( HMRC ) if asked. You must make sure your records are accurate.
Does HMRC look at social media?HMRC may observe, monitor, record and retain Internet data which is available to anyone. This is known as 'open source' material and includes news report Internet sites, Companies House and Land Registry records, blogs and social networking sites where no privacy settings have been applied.
Do HMRC record all phone calls?Our calls are recorded. If you are looking to request a copy of that recording you can contact our Income Tax Team they will be able to advise you of that process.
Do HMRC do random checks?Just as it sounds, random checks can happen at any time – regardless of the state of your accounts or whether you've triggered an alert.
What is the penalty for not declaring income in the UK?The maximum penalty for income tax evasion in the UK is seven years in prison or an unlimited fine. Evasion of VAT – in the magistrate's court, the maximum sentence is 6 months in jail or a fine of up to £20,000. Crown Court cases can be a maximum of seven years in prison or an unlimited fine.
Does HMRC know my savings?HMRC receive the bank interest figures after the end of the tax year and will use this figure to see if you owe any tax for the tax year that has just finished and will also use this figure as an estimate of your interest for the following tax year.
Do banks notify HMRC of large deposits?Although banks don't automatically notify HMRC of large deposits, it's crucial to understand that HMRC can still access more than just personal bank accounts. They can get information from various sources.
How many people do HMRC investigate?HMRC puts a lot of resources into combating tax avoidance and evasion and it is towards this key objective that it conducts a reported 300,000-plus investigations each year into Self Assessment tax returns.
What checks do HMRC do?
HMRC carry out compliance checks to:
- make sure you're paying the right amount of tax at the right time.
- make sure you're getting the right allowances and tax reliefs.
- discourage tax evasion.
- make sure the tax system is operating fairly.