Tax Investigations

These are the most common form of HMRC enquiries – investigations into individuals’ personal self-assessment tax returns.

We appreciate that to the person involved, these are serious or stressful, particularly when HMRC want to review all personal financial data, sometimes covering a lot of information and documentation, over a prolonged period.

We regularly support both current and new clients through this process, always using our experience and expertise to:

• Reduce the length of time the enquiry is open.
• Minimise the tax burden.
• Reduce the level of associated interest payable.
• Negotiate with HMRC to limit any penalty charges.

HMRC can open a ‘discovery’ assessment if they believe amounts reported in a self-assessment tax return were omitted or insufficient or if excessive relief has been claimed.

HMRC generally have four years from the end of the relevant tax year to open the investigation. However, this can be extended to 20 years if they believe the loss of tax was deliberate.

This can involve taxpayers who have not previously completed any self-assessment tax returns and must now bring their tax affairs up to date, or if all returns have been filed on time, but an error has been made.

Whether you’re an individual, sole trader, partner in a partnership or act as a Trustee, we’ll help resolve your problems by:

• Providing clarity and a plan to deal with the investigation.
• Handling all communications with HMRC.
• Preparing or reviewing HMRC calculations to determine any tax liability due.
• Negotiating penalty and interest charges.
• Seeking early closure of the enquiry.

These can range from a simple enquiry about an entry in the accounts, to a full cross-taxes enquiry challenging the accuracy of the accounts and tax return.

Full enquiries will almost certainly involve HMRC undertaking a detailed examination of the business’ books and records, and may lead to enquiries into the directors’ personal tax affairs. This could entail HMRC reviewing liabilities for corporation tax, PAYE/NIC or VAT.

Our specialist team will act to ensure the company and any affected directors only pay what is properly due. We’ll deal with every aspect of the investigation including:

• Providing clarity and a plan to deal with the investigation.
• Handling all communications with HMRC.
• Taking full control of the investigation to give you peace of mind.
• Focusing on the most efficient way to achieve the earliest possible closure.
• Preparing or reviewing HMRC calculations to determine any tax liability due.
• Striving to minimise interest and penalties.

A voluntary disclosure may be required in several circumstances, from a careless mistake in a tax return through to a history of deliberate failures.

HMRC look favourably on taxpayers who make voluntary disclosures, as they have taken the proactive step of notifying HMRC of any failures. Consequently, penalties for voluntary disclosure are lower than for a ‘prompted’ HMRC investigation, where they have instigated and opened an enquiry. It’s therefore imperative that taxpayers take the first step in disclosing such information to HMRC, before any investigation starts

There are a whole range of voluntary disclosure options and our team has supported numerous clients through virtually all of them. This means we have the experience to recommend the most appropriate disclosure method and guide you through it.

Code of Practice 9 (COP9) enquiries are the most serious civil case that HMRC can raise. They are used for cases where a taxpayer is suspected of serious fraud and usually cover the past 20 years of their tax affairs.

Our specialist team have dealt with many COP9 enquiries, so we understand the stress and uncertainty involved. Our main aim is to provide peace of mind to any taxpayer involved in a COP9 enquiry and we will take full autonomy over the procedures, to ensure the appropriate disclosures are made.

A COP9 enquiry is often time-consuming, but we’ll seek early closure of the investigation whilst assisting with all aspects, including:

• Regular correspondence with the taxpayer and HMRC to help progress the investigation.
• Preparing a Disclosure Report, detailing the taxpayers’ history over the 20 year period, with explanations of any tax offences they may have committed.
• Preparing Statements of Assets & Liabilities and Bank Accounts Operated as formally requested by HMRC.
• Negotiating with HMRC regarding the level of any tax, NIC, VAT, interest or penalties to be charged, based on each taxpayers’ particular circumstances.

Once HMRC agree to the Disclosure Report, the taxpayer will receive immunity against criminal prosecution for the tax offences fully disclosed in the report.

Disagreements between HMRC and taxpayers are often not black and white and require both parties to change how they manage the relationship. Our approach to preventing, managing and resolving tax disputes anticipates and mirrors that of HMRC, which often helps us prevent disputes

Our team of dispute resolution specialists covers all tax and business areas. We can support you through every interaction with HMRC, from strategy through to resolution. Many of our team have previously worked for HMRC, giving us extensive knowledge how they approach tax risk management.

We use our understanding of tax administration, including HMRC’s information powers, to better manage the interaction with HMRC. We are fully aware of the relevant penalties and ensure everything we do is focused on reducing them.

Where it’s not possible to resolve the matter satisfactorily with HMRC, we can support you through litigation at a Tax Tribunal.

HMRC’s No Safe Havens policy summarises their approach to offshore tax compliance, confirming their success in raising new sources of tax revenue from taxpayers’ overseas income and gains. Penalties are deliberately punitive, including potential for criminal prosecution. We’ve summarised this policy in a blog.

Their success is largely due to access to unprecedented levels of overseas financial information from over 110 global jurisdictions, who have agreed to exchange data under the Common Reporting Standard and other Automatic Exchanges of Information agreements.

HMRC are now using this information to directly target individuals where they believe offshore income or gains have not been correctly reported. They have already issued letters to thousands of taxpayers, and we expect this to increase.

Statistics suggest around one in ten residents in the UK have an offshore financial interest, but the taxation of these sources can be particularly complex, with some common misconceptions:

• Offshore Assets do not need to be reported – FALSE*
• I’ve already paid overseas tax on foreign sources, so don’t need to declare foreign sources to HMRC – FALSE*
• I was born overseas so I don’t need to declare foreign assets – FALSE*
• Foreign Rental income does not need to be declared – FALSE*
• Foreign Pensions can be ignored – FALSE*
• I can pick and choose the best Foreign Exchange Rate – FALSE
• Income accumulated before moving to the UK is tax free – FALSE*

In addition to UK domestic tax complexities, Tax Treaties with these overseas jurisdictions must also be checked to determine taxing rights and eliminate any double taxation.

All this can inevitably mean individuals face a daunting combination of complex UK tax legislation, Overseas Country Treaty aspects and in many cases a threatening letter from HMRC – an incredibly stressful and frightening experience.

We have the essential specialist knowledge and expertise to offer you clarity and support on any overseas tax matters. We can step in on your behalf, liaising directly with HMRC to:

• Correctly determine the historic/current tax position connected to overseas income or assets held.
• If necessary, formulate a strategic plan to correctly report to HMRC on your behalf, using their online Offshore Disclosure Facility.
• Negotiate penalties and interest charges.

We would also proactively explore all tax planning opportunities to identify tax mitigation opportunities, relative to current or future overseas sources.

*Residence requires full declaration of worldwide income and gains, not just UK sourced. This might not always apply to Non UK Domiciled, UK Resident individuals, in which case the matter will be far more complex.