When is HMRC likely to open a tax investigation?
A tax investigation can be stressful (not to mention costly), even if you have nothing to hide. Here are my top 7 risk factors that are likely to cause HMRC to open a tax investigation
- Late tax returns – if you look like you’re not on top of things, you might also look like your tax return might not be as accurate as it should be
- Amendments to your tax returns – leads to the inevitable question – why?
- Estimated tax returns (you have to tick a box on your return stating it is an estimated, not final return – big red flag…)
- Round sums – calculate your entries, and put the exact number calculated in – not rounded – it looks suspicious (because it is!)
- Failure to pay tax – should be obvious
- Communication with HMRC inspectors and office mishandled (be strong, be assertive – don’t be rude!)
- Failure to respond – the ostrich approach doesn’t really work, nor does putting your fingers in your ears whilst muttering “lalalalalala”. Take action. Inform your accountant. If your don’t have one – think about getting represented by one
Of course, taking heed of the above doesn’t mean you won’t get investigated. Investigations are sometimes just random, and HMRC needs to ensure that nobody feels safe that they won’t be investigated, but random investigations are only a proportion of the total investigations that get opened.
Don’t give HMRC more reasons to look into you than is necessary.