Managing your tax obligations to HMRC throughout the year can be stressful at the best of times; your anxiety levels can go into overdrive if you have to face an investigation.
The one thing you have to remember is this: there’s no reason to panic. HMRC can investigate anyone’s taxes whenever it chooses, so it doesn’t necessarily mean you’re doing anything wrong.
If you’ve never had to undergo a tax investigation, it may help alleviate the pressure if you know what to expect. Here’s some helpful advice on the process.
What is a tax investigation?
HMRC may launch an investigation into your affairs at any point to ensure you’re paying the right amount of tax.
If you’re due to undergo an investigation, HMRC will call to inform you. You’ll be required to provide any of the following:
- your self-assessment tax returns
- your accounts and calculations
- your company tax return
- your VAT returns
- your PAYE records.
There are three main types of investigation – a random check, an aspect enquiry and a full enquiry.
As the name suggests, a random enquiry will mean HMRC will pick you for no particular reason.
Aspect and full enquiries are usually triggered if there are inconsistencies in a tax return or a significant risk of error.
We cannot stress enough, though, that if you are picked at random or due to a minor error, don’t lose your head. As tax investigation specialists, we’re here to offer advice on how to prepare ahead of time.
Keep your books up to date
Having a set of accurate and updated books is more than just a legal requirement. By ensuring all your figures are up to date, you’ll reduce the risk of basic errors which could trigger an investigation.
Keeping copies of all of your receipts and invoices will also be essential if you want any potential investigations to go by without a hitch. Accurately showing your spending and income is a main element of your returns, so HMRC will be keeping a close eye on these transactions.
If you use cloud accounting software, you can scan and upload your receipts online; HMRC will accept these as well as hard copies.
File your returns on time
Although HMRC can launch investigations at random, it’s more likely to trigger one if you regularly submit your returns past the deadline.
So, whether you’re registered for VAT or file a self-assessment every year, it pays to be punctual. Making Tax Digital-compatible software will help you meet your deadlines by already having your organised financial information ready to go come filing day.
Moreover, having an accountant year-round will ensure everything is in order.
Arrange some support
Tax investigations can be a fairly lengthy process, taking you away from your everyday duties within your business.
Your best bet is to budget as a contingency, meaning that should you ever have to undergo an investigation, you have the money to bring in extra support to cover your accounting processes.
We’re always on hand to offer you our support and services should you ever need them.
Get in touch
We understand that a tax investigation can cause undue stress while you’re trying to run a business. Our specialists have supported countless business owners through the process and can for you too.
Get in touch for help preparing for a tax investigation.