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.
Financial records held by: Bank and building society accounts, online payment providers, debit and credit card accounts, credit reference agencies, crypto asset platforms and insurance companies.
During an enquiry, HMRC ask you questions about your tax return. They may also ask to look at some of the documents you have used or will use to complete your tax return. HMRC have the right to ask to see information or documents that they reasonably require for the purpose of checking your tax position.
What Should you do if HMRC Contacts you about a Compliance Check?
How likely is it to get investigated by HMRC?
This means that every self-employed taxpayer will have their affairs inspected every ten years on average. Of these taxpayers, only a small percentage will be investigated, but this percentage increases if HMRC suspects they are being underpaid, either deliberately or by accident.
HMRC receives a tip-off. You work in a high-risk industry, for example one that routinely takes cash payments. You have a large fall in income, increase in costs or there are inconsistencies between different returns. You file your returns consistently late.
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.
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.
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.
If serious criminal activity is suspected, HMRC may apply to use the powers described in the Regulation of Investigatory Powers Act 2000 (RIPA). These include covert surveillance, covert human intelligence, intercepting posts for review, monitoring telephone calls.
However, suppose the taxpayer does not declare rental income in his tax return. The Connect system can detect this and trigger an audit in that case. In this way, the system can detect possible tax evasion or avoidance by linking different data sources and detecting patterns of behaviour that indicate this.
Inconsistencies or substantial variations between different returns, such as a sudden fall in income or a notable increase in costs, can raise red flags for HMRC. Ensuring accuracy in reporting and explaining any significant changes in your financial records is key to minimizing the risk of an investigation.
HMRC may observe, monitor, record and retain internet data which is available to anyone. This is known as 'open source' material and includes: news reports. internet sites.
Since the Enterprise Act was passed in 2002, HMRC lost their status of being a preferential creditor and will therefore seek payment of any debt promptly and vigorously. In addition, since April 2009, HMRC can seek information from a wide range of sources and penalise heavily anyone who chooses not to cooperate.
The records for an accounting period will normally have to be kept for six years from the end of that period. For example, if the accounting period ends on 31 December 2012, the records have to be kept until 31 December 2018.
HMRC can also request to view the number dialled. Additionally, HMRC can ask internet providers to provide data on which websites an individual has looked at. Requests for this information are made to the Office for Communications Data Authorisations.
How far back can HMRC go in a tax investigation? 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.
If you're not employed, do not get a pension or do not complete Self Assessment, your bank or building society will tell HMRC how much interest you received at the end of the year. HMRC will tell you if you need to pay tax and how to pay it.
Banks do not notify HMRC of large deposits. However, HMRC can access our financial information by issuing a financial institution notice without our consent. They can see large deposits and other financial data like interest earned, crypto, dividends, pension contributions, Gift Aid payments, and more.
How do I know if my bank account is being monitored?
Check your bank statements: Look for unauthorized transactions or withdrawals. If you see any transactions that you did not make, contact your bank immediately. Set up alerts: You can set up alerts with your bank to notify you of any suspicious activity in your account.
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.
The Connect system also looks at social media posts, bank and credit card records, DVLA records, social media posts, and most concerningly of all, HMRC will sweep your browsing history and email records too.
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.
