Ex-HMRC Tax Investigator – Salman Anwar | talkinTAX by ASWATAX

#6 Ex-HMRC Tax Investigator – Salman Anwar | talkinTAX by ASWATAX

In brief

• This episode features Salman Anwar, a former HMRC tax investigator.
• This page is a written guide to how HMRC investigations work and how to approach one.
• An enquiry is a process with stages, and early professional help usually leads to a better result.
• Penalties depend on the behaviour behind the error and on how well you co-operate.

How HMRC investigations start

HMRC opens enquiries after a review of risk. A return that does not match third-party data, such as bank interest, property records or company filings, can be picked up by automated checks. Some enquiries are random. Others follow a tip-off or arise from a different case.

HMRC can open an enquiry into a self assessment return within 12 months of the date the return was filed. It can also assess tax outside that window if it believes there is a loss of tax. The time limit is generally 4 years for an error with no fault, 6 years for carelessness and 20 years for deliberate behaviour.

The types of case

A full enquiry looks at the whole return. An aspect enquiry looks at a single item, such as a property sale or a claim. There are also compliance checks into companies, VAT and PAYE. In more serious cases HMRC may use Code of Practice 9, which offers a person the chance to disclose all tax irregularities.

Behaviour and penalties

The penalty for an inaccuracy depends on the behaviour. HMRC treats mistakes as careless, deliberate, or deliberate and concealed. The maximum penalty is 30% of the extra tax for careless errors, 70% for deliberate errors and 100% for deliberate errors with concealment. Penalties can be reduced for prompt, full and honest disclosure and for co-operation.

Handling an enquiry

A few practical points help:

• read the letter carefully and note the deadline
• do not ignore it or reply with partial information
• gather the records HMRC has asked for, and nothing more
• take advice before you speak to an HMRC officer
• be accurate, because a wrong statement can make matters worse

A voluntary disclosure made before HMRC contacts you is usually treated more favourably than a response after the enquiry has opened. Our team can help with HMRC enquiries.

Frequently asked questions

Can I ask HMRC to stop an enquiry?

Not usually. In a self assessment enquiry you can apply to the tribunal for a closure notice once the matter is stale, but that is a specific step.

Do I have to attend an interview?

HMRC may ask for one, but there are alternatives, and you should take advice first.

Does paying the tax end the matter?

Not always. Interest and penalties may still be due, and HMRC may continue to look at other years.

If you would like to talk this through for your own situation, please book a free call with our team.