What to expect from an HMRC investigation.

What to expect from an HMRC investigation.


Tax enquires have been on the rise over the past few years and generate around £20 billion for HMRC. With the announcement of a recruitment drive to their compliance department, it’s unlikely HMRC plan to slow any time soon, in fact, we suspect quite the opposite.

That’s why we felt like now would be a great time to touch on the things you need to know should you be subject to an HMRC tax investigation.


HMRC tax investigation procedure

First of all, you will receive an official notification letter from HMRC. They aren’t likely to tell you why the investigation has started but this could be a number of reasons, for example, a tip off, regular mistakes or being in a target sector such as a cash lead business.


HMRC will usually ask you for specific information depending on the focus of their enquiry. If you are asked to provide documents you haven’t retained, don’t panic, HMRC have been known to request documents that you are not expected to by law.
This is one of the many reasons we would recommend contacting us as soon as you are contacted.

Our professional assistance can put your mind at ease and help you with your response which is usually required within 30 days.


What records might HMRC ask for?

As mentioned above, it depends on where their investigation is focused but HMRC might require any of the following (please note, this is not an exhaustive list, just the most common requests we have seen over the years);

  • Bank statements
  • Credit card statements
  • Sales invoices
  • VAT records
  • Payroll records
  • Quotes from third parties
  • Expense receipts
  • Copies of emails and correspondence


How long does a tax investigation take?

It may sound scary, but there is no time limit for HMRC to complete their investigation. Some are complete in a matter of weeks and others have been known to take years. If you have been selected for a full enquiry we would expect at least a year.


Obviously the longer a tax investigation goes on the more costly it becomes, which is why we offer a tax investigation fee protection service to offset potential professional costs.


How far back can HMRC investigate?

If only minor adjustments are necessary, HMRC may stop the investigation there and not look into previous returns. With larger adjustments, however, earlier years are likely to be looked at.

If the errors are seen to be careless, a maximum of six previous years can be looked at in the settlement. This is the most common scenario.

If the error was deliberate, HMRC have the power to go back 20 years.



If an adjustment is needed to your tax or VAT return, a penalty may be charged.
The amount of the penalty takes into account the reason for the error.

For an honest mistake, HMRC usually just be ask you to pay the remaining tax within 30 days of the decision, usually with interest.

If there was an additional charge and it is clear that you’ve taken care with your return but made a genuine mistake, the penalty is less severe than if you have deliberately falsified or submitted a fraudulent return.

Typically, you’d be looking at another 15-100% on top of your payment but it can be anything up to 300% if  you are seen to have been deliberately falsifying returns.

In the most serious situations, a criminal prosecution might be brought. We would always suggest being as cooperative as possible.

If you don’t agree with a decision, you have 30 days in which to appeal.


Reducing your chances of an HMRC investigation

While there is no guarantee of preventing a tax investigation, there are steps you can take to reduce the chances of being subject to one or reducing the time the investigation will last. These include:

  • Ensuring returns are submitted on time
  • Taking care that returns submitted are accurate
  • Provide information on any changes before it’s asked for
  • Keep comprehensive records to support claims where necessary


Finally, to mitigate any potential extra costs we would recommend using our fee protection service to give you that extra peace of mind in the event of an enquiry
If this is something you require more information on please call us on 01482888820