Tax Investigations – Our Top 10 Ways To Mess Them Up

So, you’ve got a love letter from HMRC (talking about tax investigations) – the kind that makes your heart race faster than a toddler on a sugar high. Suddenly, those folks at HMRC are paying more attention to you than your last Instagram post. But hey, a tax investigation can’t be that bad, right? Wrong! Here’s how to turn your tax investigation into a sideshow of errors and expenses. Let’s dive into the top 10 ways to mess you tax investigation (with some tips on how not to, just in case you’re into that sort of thing).

Knee-Jerk Reactions: So, HMRC wants to chat. Before you start sweating bullets or blurting out confessions like a character in a crime drama, take a breath. Remember, these folks have probably done more research on you than your last Tinder date.

Get some expert advice, keep calm, and don’t let panic be your co-pilot.

Stick with Your Current Accountant: Sure, your accountant might be as useful as a chocolate teapot in a sauna, but hey, they’re your chocolate teapot, right?

Wrong again. Dealing with HMRC needs a seasoned pro, not someone who’s still figuring out what “tax” means. Consider upgrading to an accountant who’s not afraid to go toe-to-toe with the taxman. You need someone who is adept at engaging with HMRC assertively and negotiating your position effectively.

Lack of Disclosure: HMRC wants to see your files… but before you dump everything on their doorstep like it’s a yard sale, think twice.

You don’t want to hand over more dirt than a pig in a mud bath. Get savvy advice on what to disclose and what to keep under wraps. You don’t want to hide anything. However, you don’t want to hand over all your personal and business files, which, in turn, can open up an unnecessary can of worms. You only want to disclose everything related to what they are asking about.

Fix the Books: Can’t find that paper trail? Tempted to whip up some fake documents like a chef on a cooking show?

Don’t even think about it! HMRC has a nose for lies sharper than a bloodhound on the hunt. Keep your integrity intact – it’s worth more than a thousand cooked books.

Attend HMRC meetings on your own and be unprepared: Meeting with the taxman is like walking into a lion’s den armed with a toothpick.

Don’t go it alone, and for the love of all things taxable, prepare! You don’t want to end up as the punchline in HMRC’s comedy show.

Open-ended questions are crafted to ensnare you, potentially causing you to divulge more than intended. Feeling pressured or confronted with enquiries requiring thoughtful reflection, rather than relying solely on memory, can result in unintended consequences.

The meeting may prove exasperating, daunting, and highly focused, delving deeply into intricate details. Attempting negotiations without the guidance of an experienced tax adviser is reckless.

It’s advisable to have someone experienced in dealing with HMRC with you and in some circumstances, they will be able to represent you without you having to attend.

Assume previous tax returns won’t be looked at: Just because you filed your taxes in the Dark Ages doesn’t mean HMRC won’t come knocking. Just because your skeletons are kept firmly in the closet; doesn’t meant that they won’t come back to haunt you.

If fraudulent or negligent behaviour is detected, HMRC retains the authority to initiate an enquiry into past tax returns spanning up to twenty years, regardless of whether they were filed more than 12 months ago.

Accepting HMRC’s understanding of your business model: So, HMRC thinks they’ve cracked your business model like it’s a secret code.

Don’t just roll over and accept their version of events. Should your tax returns exhibit gaps or omissions, HMRC may assemble a business model or assessment to approximate the extent of any discrepancies. While these business models may initially appear convincing, they often rely on assumptions, which are subject to interpretation. Seeking expert advice before finalising any agreement is imperative.

Panic About Deadlines: HMRC loves to play the deadline game. It might seem as though HMRC operates under one set of rules while you’re subjected to another, leading to situations where they demand extensive documentation within tight time constraints.

If their timeline feels tighter than your skinny jeans after Christmas dinner, push back. You’re not a tax machine; you’re a human being (probably). Again, if this is being dealt with by a specialist tax investigation adviser you may find this carries more weight. 

Hold Out to the Bitter End: Stubbornness might be a virtue in some situations, but not when you’re facing off against HMRC. Sometimes it’s better to wave the white flag early and live to fight another day.

You have the option to delay until the conclusion, but if you’re aware or suspect that there may be outstanding tax owed by you, making a payment on account can mitigate the interest accrued and demonstrate cooperation. However, it’s crucial to seek professional advice before proceeding with this approach.

Prevention Is Better Than Cure: The best way to survive a tax investigation? Avoid it like the plague. File your taxes on time, dot your i’s, cross your t’s, and don’t leave any room for HMRC to swoop in like a tax-collecting ninja.

That being said some tax investigations are inevitable. It could be because you have been picked at random because of your earnings or because you are in a particular industry that’s seen as high risk.

If your financial situation is intricate, particularly involving complex personal wealth, avoid solely relying on the company accountant. Their focus differs significantly from tax planning, returns, and advisory services.

So, if you find yourself in the crosshairs of an HMRC iinvestigation, don’t panic! Get some expert advice, keep your cool, and remember: the only thing scarier than the taxman is a taxman with a sense of humour.

Tax Investigation experts

Chartered Tax Advisers Anton Lane and Cate Jackson are both experts in the field of tax investigations with in dpeth knowledge and experience in all areas of tax investigations, if you fiind yourself on the wrong side of HMRC they are expertly placed to offer guideenced thorugh the whole process

To contact Anton or Cate about a possible tax investigation then please contact them through our investigation page here

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