HMRC tax investigation

Receiving a letter from HMRC can be worrying, particularly when you are unsure why your tax affairs are being checked or what information you should provide. The most important step is to respond carefully, accurately and within the stated deadline.

Asmat & Co Accountants provides practical support to individuals, sole traders, landlords, company directors and businesses facing an HMRC tax investigation. We can review the scope of the enquiry, organise your records, identify potential issues and communicate with HMRC on your behalf.

An investigation does not automatically mean HMRC believes you have acted dishonestly. Some checks focus on a single figure or transaction, while others examine a wider part of your tax affairs. Whatever the circumstances, getting professional advice early can help prevent misunderstandings, unnecessary delays and avoidable penalties.

Have you received a letter from HMRC?

HMRC will normally write to explain that it is opening a compliance check. The letter may identify the tax, accounting period or specific issue being reviewed. It may also request documents, explanations or access to business records.

Before responding, you should understand:

• Which tax periods are being examined
• Whether the check concerns a specific issue or your wider tax position
• What records HMRC has requested
• The deadline for providing information
• Whether the request is reasonable and relevant
• Whether any figures previously submitted may need further explanation

You should not ignore the letter, even if you believe your return is correct. Missing a deadline or failing to comply with a formal information notice can create additional problems.

You should also avoid sending large amounts of information without first checking what HMRC has legally requested. Providing unclear, incomplete or unnecessary documents can lead to further questions and lengthen the investigation.

What is an HMRC tax investigation?

An HMRC investigation, commonly described by HMRC as a compliance check, is a review of whether the correct amount of tax has been declared and paid.

HMRC may examine personal or business matters involving:

• Self Assessment
• Corporation Tax
• VAT
• PAYE and National Insurance
• Capital Gains Tax
• Construction Industry Scheme deductions
• Rental and property income
• Business expenses
• Director remuneration and dividends
• Undeclared or overseas income

A check may focus on one entry in a tax return, such as an unusually high expense claim. In other cases, HMRC may review the underlying accounts, bank transactions and supporting records for one or more accounting periods.

If the enquiry relates to a return prepared previously, our tax return services can help establish how the figures were calculated and whether supporting evidence is available.

Why might HMRC investigate your tax affairs?

There is not always one clear reason. HMRC uses information from tax returns, banks, employers, Companies House, government departments and other third parties to identify possible inconsistencies.

Common reasons for a compliance check can include:

• Figures that do not match information held by HMRC
• Significant changes in income, expenses or profit
• Repeated late returns or tax payments
• Large or unusual expense claims
• Differences between company accounts and tax returns
• VAT figures that appear inconsistent with turnover
• Undeclared property, investment or overseas income
• Cash transactions that are difficult to verify
• Concerns about payroll, employment status or subcontractors
• Information received from another investigation or third party

An unusual figure is not necessarily incorrect. However, you may need to explain the commercial reason behind it and provide reliable records to support your position.

Types of HMRC investigation

A check into a specific issue

HMRC may examine one particular figure, claim or transaction. This could include an expense, a source of income, a VAT repayment or the treatment of a business asset.

A focused check may be resolved relatively quickly when the records are complete and the explanation is clear.

A wider review of your tax affairs

A broader enquiry can involve your full return, business accounts, bank statements and accounting records. HMRC may compare reported income with deposits, invoices, expenses and information received from other sources.

Where the investigation covers company records, we can review the relationship between the return and your filed company accounts.

VAT, PAYE and CIS compliance checks

HMRC may review VAT calculations, payroll records, employee status, benefits, subcontractor deductions or Construction Industry Scheme submissions.

VAT enquiries can involve invoices, business use, input tax claims, VAT schemes and the timing of sales. Our VAT return support can help identify how previous VAT figures were prepared and whether corrections may be required.

Serious or specialist investigations

Some cases are handled under specialist procedures, including Code of Practice 8 or Code of Practice 9. These cases require immediate attention, particularly where HMRC suspects deliberate conduct, tax avoidance or fraud.

If your letter refers to fraud, the Contractual Disclosure Facility, Code of Practice 9 or a criminal investigation, you should obtain specialist advice before making any statement or disclosure. Where legal representation is also appropriate, we will explain this clearly and can work alongside your solicitor.

How Asmat & Co Accountants can help

Our role is to establish the facts, protect your position and help you deal with HMRC in an organised and professional way.

Depending on the scope of the investigation, we can:

• Review HMRC’s opening letter and information requests
• Explain what HMRC is investigating and what happens next
• Obtain authority to communicate with HMRC for you
• Review submitted returns, accounts and supporting calculations
• Reconcile accounting records with bank statements and invoices
• Identify errors, omissions or areas requiring explanation
• Prepare structured responses to HMRC’s questions
• Attend meetings or calls with HMRC where appropriate
• Help prepare voluntary disclosures or amended figures
• Review proposed tax adjustments, interest and penalties
• Challenge conclusions that are not supported by the evidence
• Assist with payment discussions where additional tax is due
• Support a review, appeal or dispute resolution process when appropriate

We will not promise to make an investigation disappear or guarantee that no additional tax will be due. Instead, you receive an honest assessment of your position, clear explanations and advice based on the available records.

What happens after you appoint us?

We review the HMRC correspondence

We begin by examining the opening letter, requested documents, deadlines and the tax periods involved. This allows us to determine the likely scope and urgency of the enquiry.

We examine your records

We review the relevant returns, accounts, bank statements, invoices, receipts, payroll data and supporting documents. This may reveal straightforward explanations, missing evidence or figures that need to be corrected.

Accurate records can make a significant difference during an enquiry. Where your records need to be reconstructed or brought up to date, our bookkeeping services can help organise transactions and supporting evidence.

We agree a response strategy

We explain the strengths and weaknesses of your position before responding. Where the figures are correct, we prepare a clear explanation supported by evidence. Where an error exists, we help determine how it occurred and the most appropriate way to disclose it.

We communicate with HMRC

Once authorised, we can correspond with the HMRC officer dealing with the investigation. We will keep you informed about questions, deadlines, proposed adjustments and important decisions.

You will still need to provide accurate information and approve important submissions. Appointing an accountant does not remove your legal responsibility for your tax affairs, but it means you do not have to manage the process alone.

We work towards closure

Our objective is to resolve the enquiry efficiently and ensure HMRC’s final conclusions reflect the available evidence.

An investigation may end with:

• No change to the original tax position
• An agreed correction to a return
• Additional tax and interest becoming payable
• A penalty based on the nature of an inaccuracy
• A repayment where too much tax was paid
• A formal appeal or further dispute process

What records might HMRC request?

The documents required will depend on the tax and issue being checked. HMRC may ask for:

• Sales invoices and purchase invoices
• Receipts and expense records
• Personal and business bank statements
• Credit card and payment platform records
• Cash books and till records
• Accounting software reports
• Payroll and employment records
• VAT calculations and supporting invoices
• Contracts and agreements
• Dividend paperwork
• Mileage and travel records
• Property income and expense records
• Details of overseas income or assets

Do not create, alter or backdate documents after receiving an enquiry. Where evidence is missing, it is usually better to explain the position honestly and determine whether the figure can be supported through alternative records.

What happens if an error is discovered?

Not every error leads to the same outcome. HMRC considers why the mistake happened, whether reasonable care was taken, whether the disclosure was prompted or unprompted and how fully you cooperate during the investigation.

A genuine mistake supported by good records will be treated differently from an inaccuracy that HMRC considers careless, deliberate or deliberately concealed.

Where an error has occurred, early and complete disclosure can be important. We can help you calculate the correct position, explain the circumstances and present the relevant information clearly.

Additional tax may attract interest, and a penalty may also apply. However, penalties are not automatic in every case. For example, HMRC may not charge an inaccuracy penalty where you can demonstrate that reasonable care was taken.

Can you challenge HMRC’s decision?

You do not have to accept a decision simply because it has been made by HMRC. If you disagree, the available options may include:

• Providing further evidence to the officer
• Requesting a statutory review by another HMRC officer
• Using Alternative Dispute Resolution where suitable
• Appealing to the independent tax tribunal

Many HMRC decisions and penalties have a 30-day appeal deadline, although you should always check the specific letter you receive.

Before challenging a decision, it is important to understand the technical issue, supporting evidence, costs and possible outcomes. We can review HMRC’s reasoning and help you decide on a proportionate course of action.

Support for individuals and businesses

We assist UK taxpayers with enquiries affecting:

• Sole traders and self-employed people
• Limited companies and company directors
• Landlords and property investors
• Partnerships and LLPs
• Contractors and freelancers
• Employers
• VAT-registered businesses
• Individuals with multiple sources of income

You do not need to be an existing Asmat & Co Accountants client to seek help with an HMRC enquiry. We can review work prepared by another accountant or tax adviser and establish what information has previously been submitted.

Why choose Asmat & Co Accountants?

An investigation requires more than simply forwarding documents to HMRC. Your accountant must understand how the original figures were produced, recognise potential risks and explain the position in a way that is accurate and easy to follow.

Asmat & Co Accountants offers:

• 19 years of hands-on accountancy experience
• Qualified and experienced accounting professionals
• Clear explanations without unnecessary jargon
• Practical support with records, accounts and tax returns
• Direct communication with HMRC where authorised
• Transparent advice about risks and possible outcomes
• Support for both individuals and businesses
• A professional and confidential service

We take time to understand the circumstances behind the figures. This helps us distinguish between genuine mistakes, missing evidence, accounting differences and matters requiring a formal disclosure.

Get help with an HMRC investigation

The earlier you understand HMRC’s concerns, the easier it is to prepare an accurate and controlled response. Contact our team to discuss your HMRC letter, the information requested and the next steps for protecting your position.

Frequently asked questions

What triggers an HMRC tax investigation?

An HMRC tax investigation can be triggered by inconsistencies between a tax return and information held by HMRC, unusual changes in income or expenses, repeated filing problems, significant VAT repayments, undeclared income or information obtained from third parties.

A check does not necessarily mean HMRC believes you have done something wrong. HMRC may simply require evidence or an explanation before confirming that the submitted figures are correct.

How far back can HMRC investigate?

The period HMRC can review depends on the tax involved and the reason for any loss of tax.

The normal assessment time limit is generally 4 years. It may extend to 6 years where tax has been lost because of careless behaviour, 12 years in certain offshore cases and up to 20 years in some deliberate or failure-to-notify situations.

Different rules and exceptions can apply, so the dates and circumstances of your case should be reviewed carefully.

How long does an HMRC investigation take?

There is no fixed timescale. A straightforward check into one figure may be resolved within a few months, while a wider or disputed investigation can take considerably longer.

The timescale can be affected by the quality of the records, the complexity of the issue, how quickly information is supplied and whether HMRC raises additional questions. Providing clear, relevant and properly organised evidence can help reduce unnecessary delays.

Can an accountant deal with HMRC on my behalf?

Yes. You can authorise an accountant or tax adviser to communicate with HMRC and manage correspondence on your behalf.

Your accountant can review information requests, prepare responses, discuss technical issues and attend meetings where appropriate. You remain responsible for providing complete and accurate information and approving important submissions.

What happens if HMRC finds a mistake?

HMRC may amend the return or assessment and request payment of any additional tax and interest. A penalty may also apply depending on whether the error was innocent despite reasonable care, careless, deliberate or deliberately concealed.

The amount may also be affected by whether you disclosed the error before HMRC identified it and how fully you cooperate. An accountant can review HMRC’s calculations, explain how the mistake occurred and challenge any adjustment or penalty that is not justified.