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Surviving a tax investigation

  • Blog
  • 14 January 2016

Knowing that you are the subject of a tax investigation is almost always a stressful business. The cost to both your emotional and financial well-being has the potential to be vast but there are ways in which to minimise the impact - and survive.

First and foremost, it is essential to stay calm and to seek the advice of an experienced professional. Members of the FSB benefit from automatic access to our Investigation Protection, which includes free, comprehensive tax advice and tax investigation insurance to make this easier and to minimise the financial impact of this sort of investigation, which could cost £5,000 in adviser fees alone.

Unless you are a tax professional, it is usually unwise to shun experienced assistance. Tax is a very complicated subject and you are likely to benefit greatly from the help of someone who is not only experienced in resolving tax investigations, but is also knowledgeable about operating practices within HMRC.

Do not be tempted to lie, destroy or throw away documents as this could lead to the taxman assuming that you are trying to hide something. You may also need to obtain replacements for paperwork if there are any gaps in your records.

If you don’t understand the reasons behind some of the taxman’s questions, don’t be afraid to ask. HMRC’s policy is to work collaboratively on a non-adversarial basis to resolve any dispute in a co-operative manner.

Manage your deadlines and don’t promise to meet any time scale unless you’re certain you can deliver. Missed deadlines can lead to increased penalties and formal information demands.

In the same vein, be realistic when it comes to agreeing repayments as missed deadlines can have serious consequences.

Don't underestimate the seriousness of an investigation, either. The Revenue has limited resources and so if it is focusing on you, it is likely that it has a good reason. Take the investigation seriously and don’t assume that there has been a mistake or that an interest will only be shown in the current or immediately previous tax year.

If you know that there has been an error in your tax return, be honest. A full disclosure is vital if you want to avoid increased penalties and the potential for a criminal investigation.

When it comes to responding to the taxman, think critically and, if possible, pre-empt the next question and offer supporting documentation in advance. This sort of helpfulness, as well as meeting deadlines and offering full disclosure, can help reduce penalties should they be imposed.

If you are called for a meeting, ensure that you prepare properly and ask for an agenda in advance. Take along any relevant documents and, at all times, try to be patient and helpful, asking for clarification if required.

If the Revenue provides meeting notes, check them thoroughly and inform the taxman of any required amendments. This is important as these may be used if the matter goes to court.

In some cases, mediation or ADR may be needed to progress the process and to avoid a tribunal hearing. This may allow for compromises to be reached to the benefit of all parties involved.

 Surviving a tax investigation

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