HMRC Investigations Into Personal Tax Returns
​
The majority of tax investigations conducted by HMRC are focused on the tax returns submitted by individuals. Some investigations revolve around suspected omissions or understatements of income such as interest, dividends, rental income, or capital gains on tax returns.
Description
​
In instances where a company tax investigation is initiated by HMRC, they may also review the personal tax affairs of the company directors, particularly in smaller or family-run companies. However, a company's tax investigation does not automatically grant HMRC the authority to obtain personal information from the directors.
Tax investigations are typically categorized as "aspect" enquiries or "full" enquiries, although there is no legislative difference between the two. "Aspect" enquiries focus on specific entries on the tax return, while "full" enquiries examine all aspects of the return.
​
Investigations Into Tax Returns Where There Is No Business Involved
HMRC can access information about bank interest and dividends received by individuals, cross-referencing this with tax returns to identify discrepancies. Similarly, capital gains tax investigations are initiated if HMRC believes that a capital gain has been omitted from a tax return.
While these investigations are often straightforward, complications can arise, such as the absence of receipts to evidence allowable expenditures, especially in cases involving rental properties undergoing refurbishment.
Investigations Into Tax Returns Where There Is A Business Involved
In full tax investigations involving businesses, HMRC typically request access to all business records and certain personal financial records, including private bank accounts. They scrutinize these records to ensure accurate reporting of income and expenses.
HMRC may also request face-to-face meetings with taxpayers to understand their business operations. Our specialist tax team advises taxpayers not to attend such meetings unrepresented and recommends that meetings ideally occur without the taxpayer's presence.
Where errors are identified, HMRC can collect tax owed for earlier years if the same error occurred. In some cases, HMRC can review tax affairs dating back up to 20 years.
​
How We Can Help
​
We are experts in tax investigations and is well-versed in HMRC's powers and limitations. We challenge HMRC when necessary, particularly in cases where they attempt to extend investigations into directors' personal tax affairs without valid reasons.
We work closely with clients and HMRC to resolve discrepancies, negotiate any required additions to profits, and minimise tax liabilities and penalties.
If HMRC has initiated an enquiry into your personal tax affairs, please contact us for a free, confidential, and no-obligation discussion. We are happy to offer an initial meeting free of charge to prospective clients.