Tax Investigations

COMPREHENSIVE & CONFIDENCE-INSPIRING

Our specialist tax team deal with all investigations, including: 

• Section 9a Enquiries
• Self-Assessment Enquiries
• HMRC Corporation Tax Investigations
• Voluntary Disclosures
• Code of Practice 9 (COP9)
• Tax Dispute Resolution
• Offshore Disclosures
• PAYE & Employer Compliance Reviews
• VAT and Customs Duty Enquiries
• Tax Fee Protection Insurance
• Professional Health Check Reviews

SECTION 9A ENQUIRIES

The most common form of enquiry – investigations into individuals’ personal self-assessment tax returns. 

We appreciate that to the person involved, these are serious or stressful, particularly when HMRC or the Revenue 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/Revenue to limit any penalty charges. 

SELF-ASSESSMENT ENQUIRIES

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. 

HMRC CORPORATE TAX INVESTIGATIONS

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. 

VOLUNTARY DISCLOSURES

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)

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. 

TAX DISPUTE RESOLUTION

Disagreements between HMRC/the Revenue 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/the Revenue, 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, from strategy through to resolution. Many of our team have previously worked for HMRC or the Revenue, giving us extensive knowledge how they approach tax risk management.   

We use our understanding of tax administration to better manage the interaction with HMRC/the Revenue. 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, we can support you through litigation at a Tax Tribunal. 

OFFSHORE DISCLOSURES

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. 

PAYE & EMPLOYER COMPLIANCE REVIEWS

HMRC Reviews 

HMRC are renowned for opening numerous Employer Compliance reviews each year, for all types of businesses. These reviews can range from a simple meeting with no actions found to one that’s open for several years, depending on the complexity of the issues highlighted. 

Such reviews are typically opened where HMRC view the business to be ‘high risk’, generally due to late filings or potentially a disgruntled ex-employee tipping off HMRC. 

An Employer Compliance review can consume a lot of your time, both in providing HMRC with the information requested, plus analysing the relevant legislation to minimise any potential liabilities and penalties. 

While a review of this type can cover all aspects of PAYE & Employer Compliance, in our experience the following matters are the most common: 

• PAYE Operation. 
• Employee benefits and reporting. 
• Expense records and reporting, including per diems and scale rate payments. 
• PAYE treatment of Non-Executive Directors. 
• Overseas employee matters including NI compliance. 
• National Minimum Wage. 

FURLOUGH SCHEMES AND IR35

We expect to see a growing number of Coronavirus Job Retention Scheme reviews for employers who have made claims during the COVID pandemic. This risks employers being deemed to have made incorrect claims, resulting in repayments becoming due to HMRC. It’s therefore vital that the team dealing with the review fully understand the scheme’s operation and guidance, to ensure only genuine repayments are made to HMRC. 

Additionally, following the delayed introduction of the Off-Payroll Working IR35 Reform in the private sector from April 2021, we also expect to see HMRC increase their reviews here, with a view to recovering underpaid PAYE where they believe incorrect status assessments have been made. 

TAX FEE PROTECTION SERVICE

It’s the service you don’t know you need until it’s too late  – but we’re here to change that. 

HMRC carries out thousands of tax enquiries into UK individuals and businesses every year. Whilst these are often triggered because of a particular red-flag, HMRC can and do regularly select taxpayers for enquiries using their ‘super-computer’ HMRC Connect.  

Whilst you may be confident your tax affairs are accurate and up to date, if you’re the subject of an HMRC enquiry you must respond to it, even if you’ve done nothing wrong.  

The fees and costs of dealing with the enquiry are payable by you and cannot be reclaimed from HMRC. Hence why it’s wise to protect yourself against the costs of tax enquiry through the Tax Fee Protection Service. After all, you wouldn’t drive your car without insurance! 

HMRC Connect identifies more than 80% of the taxpayers HMRC choose to investigate. The system collects data from 30 sources, including UK and offshore banks, Companies House, the Land Registry, estate agents, the DVLA and other licensing authorities, and social media.  

The data can be instantly reviewed by more than 3,000 HMRC investigators to produce a financial fingerprint for any taxpayer. If there are any discrepancies between tax returns or business accounts sent to HMRC, a tax enquiry will inevitably follow. Tax enquiries started from ‘Connect’ have produced billions of pounds in additional tax over the last few years.  

Using ‘Connect’, HMRC can now target enquiries more accurately than ever – but they still get it wrong sometimes. That’s why we will always challenge HMRC regarding their perceived risks for opening an enquiry when defending clients. 

We offer our clients protection through Qdos Advantage, the market leader in Tax Fee Protection Services for the UK. We have selected Qdos as our service partner in line with our promise to save you money and give you peace of mind.

Quick Facts 

Average length of HMRC enquiry – 16 months 

Average cost of HMRC enquiry – £5,000 

Tax Fee Protection Service – The Facts 

Tax Fee Protection Service covers the enquiry fees for HMRC enquiries into a range of taxes, including Corporation Tax, Income Tax, PAYE/NIC, IR35, VAT, Inheritance Tax and many more. 

Coverage will only be provided if the service is in place prior to the enquiry being issued by HMRC. It is therefore vital that taxpayers consider the risk of failing to invest in the Tax Free Protection Service.

The service covers up to £100,000 towards your fees for co-operating with an HMRC Enquiry.

Policies range from £180 – £600 annually per individual tax entity, including businesses with turnover of up to £25m. Discounts are available for group policies and specialist quotes can be provided for businesses with turnover in excess of £25m. 

Finally, some taxpayers may opt to avoid paying professional fees and Tax Fee Protection Service altogether, opting to deal with the enquiry themselves. This is not recommended for taxpayers under enquiry, as we’ve seen many examples of individuals and companies having to pay considerably more tax, interest and penalties than they may have been liable for. 

VAT AND CUSTOMS DUTY ENQUIRIES

If your business is notified by HMRC that they propose to undertake an enquiry, we’ll provide reassurance and ensure the matter is resolved as quickly and efficiently as possible. 

Whether it’s a VAT enquiry or a Trade and Customs Compliance review, our indirect tax team have extensive experience of supporting our clients through this process. Our team includes ex-HMRC Officers with years of experience, so we’ll explain not only what to expect during the enquiry, but also why it has arisen. Whether you’ve received a request for a full on-site VAT inspection, or a more targeted enquiry focussing on one area or period, our specialists can help you collate the information needed to respond to HMRC. 

This will include a review of the information to identify any issues and whether you should make any disclosures to HMRC. Using our knowledge of HMRC’s internal processes, we will always try to ensure that any disclosure you make will eliminate or mitigate any HMRC interest and penalties HMRC. 

Our support includes: 

• Preparation for HMRC’s visit. 
• Attendance on the day to manage any interaction with the Officer. 
• Handling all pre and post-visit communications and actions required to bring the enquiry to an early conclusion, including any calculations necessary to quantify tax liability, and negotiating penalty and interest charges. 

If, following interaction with HMRC, you receive a challenge or unfavourable decision from HMRC on VAT, Customs Duty or any other indirect tax, we can help you with our practical and commercial approach to settling disputes. 

If you haven’t had a visit or enquiry from HMRC for a number of years, or if there have been significant changes to the staffing or operation of your business, you may want the peace of mind of our VAT Health Check. Designed to address the areas covered by HMRC on visits, and more, it can provide assurance that your current processes and controls are robust or if necessary, pre-empt issues where they arise. 

COMPLIANCE REVIEW HEALTH CHECKS

Given the risk of an HMRC PAYE & Employer Compliance Review, many businesses choose to bring in our experts. We carry out a health check review of internal processes and reporting procedures to highlight any inconsistencies and suggest changes to ensure compliance with current legislation and the interaction with HMRC’s guidance. 

Such a review is invaluable for minimising the chance of HMRC highlighting any errors which could result in substantial liabilities and penalties. 

As part of the health check, we also highlight any areas requiring voluntary disclosure to HMRC. This minimises the number of years HMRC can look back to recover underpaid liabilities on an error and reduces any penalties charged, in comparison to what HMRC which impose if they found the error themselves. 

Our team of experts will work with your business not only to support you through any HMRC reviews if they arise, but also to ensure you’re fully compliant with current legislation, significantly reducing risk of a future HMRC investigation. 

PROFESSIONAL HEALTH-CHECK REVIEWS

As well as assisting with an HMRC enquiry or investigation, our team are also on hand to carry out independent professional reviews of your current practices and make recommendations to ensure full compliance with current legislation and the interaction with HMRC’s guidance. 

Our reviews can cover a full range within a particular tax or be a specific area review, depending on your requirements across: 

• Corporation Tax 
• VAT 
• PAYE & Employer Compliance, including employee expenses & benefits 
• National Minimum Wage 

Following our review, you’ll understand your current compliance status, be aware of any areas of under- or over-compliance and how to rectify them, and have a series of recommendations aimed at strengthening your risk management controls, policies and procedures. 

Should you wish to discuss a potential review, please get in touch; we’ll be happy to help.