Any person or business can be selected for an HM Revenue & Customs (HMRC) investigation at potentially any time – meaning you and your clients never know when an enquiry might be just around the corner.
If a client is selected for a tax investigation, they will receive a letter from HMRC notifying them of this. In most cases, they will need to respond to this letter within a tight timeframe of between 30 and 35 days, so it is important to act fast.
In the early stages of an investigation, it is important not to panic. However, it is vital to seek specialist advice from an accountant at the earliest possible opportunity to resolve the matter quickly and with minimum disruption to the business.
Depending on the type of enquiry they have been selected for – which will usually be either an ‘aspect enquiry’ examining a specific aspect of their tax return or a ‘full enquiry’ intending to take a broader look at their finances – the investigation could take anywhere between three and 18 months. Fortunately, however, this timeframe can usually be cut down significantly if advice is sought in good time.
If the business has been targeted, they will most likely be asked to provide the Revenue with details of bank statements, paying-in slips, VAT records, payroll records and more. If records are kept electronically, evidence of this will need to be provided.
In some cases, the business owner or directors might be asked to attend a meeting with an HMRC investigator, but if expert advice has been sought early on, the matter can often be resolved long before this becomes likely. In the event that they are asked to meet with an investigator, an accountant might be able to accompany them.
Whatever the circumstances, it is important to act fast and to respond to any written enquiries from HMRC within the stated timeframes throughout the investigation, as the tax authority can issue fines if a business responds too slowly.
The most important thing is for the client to contact the accountant as soon as possible!