Tax InvestigationService

What is an HMRC tax investigation?

A tax investigation occurs when HMRC make enquiries into the tax affairs of a business or individual. Any person or business that submits a tax return can be investigated by HMRC. The investigation looks for any financial irregularities, mistakes, or potential signs of fraudulent activity.

Many tax investigations are random. Unusual fluctuations, undisclosed accounts and random spending can also prompt an enquiry into individuals and companies.

Tax investigations are on the rise

With a budget deficit of over £355 billion, we fully expect HMRC to raise more enquiries this year to increase tax revenue and plug the hole left in the government’s finances due to the economic damage caused by COVID-19.

• HMRC are increasing their efforts to reduce aggressive tax avoidance and evasion.
• They conducted 394,000 tax enquiries last year
• They opened 102,000 investigations into taxpayers in the first quarter of 2021, that’s up 36% from the previous quarter.

Even if you have done nothing wrong, many tax enquiries are conducted at random.

Could you be affected?

Powerful new software can trace even the smallest discrepancy in spending or earnings, prompting an investigation into individuals and businesses. 83% of tax investigations are triggered by HMRC’s ‘Connect’ system.

Does your business claim R&D tax relief?

HMRC is putting additional resources into detecting errors and suspected fraud by businesses claiming R&D tax reliefs. This includes recruiting 250 trained staff dedicated to identifying potential misuse of the R&D scheme. It has never been more important to ensure your R&D tax relief claims are done properly. However, if you are investigated, the Shorts Tax Investigation Service will be able to help.

How our Tax Investigation Service can help

HMRC investigations can be disruptive, intrusive, and expensive. The process can drag on for a year or more, creating mounting costs and rocketing stress levels, even if there has been no wrongdoing.

• For a small annual fee, our Tax Investigation Service will defend you, managing the entire conversation with HMRC and translating the many complicated questions they may ask.
• We will help you submit any required information, and minimise the impact on your business or personal life.
• What’s more, through our partnership with Professional Fee Protection, our costs incurred defending you against HMRC will usually be covered up to £100k at no extra cost to you.

For limited companies and partnerships, the policy offers inclusive protection for relevant individuals. When the business signs up, all directors, partners, their spouses, and the company secretary of the business will also receive representation during an enquiry into their personal affairs as well as the business.

Some conditions apply, please read our full service summary.

Professional Fee Protection included

When you subscribe to our Tax Investigation Service, we are able to make a claim against our insurance policy held with Professional Fee Protection in respect of our fees incurred (up to £100,000 per claim unless otherwise indicated) when we defend a client who is subject to any of the following events:

• A full tax enquiry
• An aspect enquiry or business inspection notice
• PAYE/CIS compliance visits
• PAYE, NIC or CIS disputes
• Employment status disputes
• VAT compliance visits and disputes
• IHT cover
• Partner/Director cover
• Applications to judicial review
• IR35 status checks and disputes
• R&D Tax relief enquiries – Please note, Professional Fee Protection cover will only apply when the Shorts team have prepared the R&D claim on your behalf.
• And more

Some exclusions apply, so we encourage you to read our Tax Investigation Service summary for more information.

When you subscribe to our Tax Investigation Service, you also benefit from access to a free client legal helpline. The cost of supporting you throughout an investigation is not covered in our usual accountancy fees.