Top Tips for Dealing with an HMRC Enquiry

According to recent statistics released by UHY Hacker Young, the amount of Corporation Tax recovered through investigations into small and medium enterprises (SMEs) increased by £489 million during the 2014/15 tax year.

Typically smaller businesses will have limited financial resources to defend against such an enquiry and therefore can be perceived as an ‘easy target’ by HMRC.

It was also announced during the budget in March that the government has set a tax compliance yield of £27 billion for the 2016/17 tax year meaning the number of enquiries are likely to keep increasing for the near future.

With this in mind, I have included 5 top tips for dealing with an investigation:

1. Check the enquiry is in time – The length of time HMRC have in order to open an enquiry into a particular tax return is governed by the legislation. Therefore the starting point for any investigation should be to ensure the enquiry notice has been received within the permitted time.
2. Respond in a timely manner – The letter from HMRC should state a date by which they would like to receive the requested information. Every effort should be made to meet this deadline or if it is not possible, a new deadline should be agreed with the inspector. Ignoring the letter will not make the investigation go away but could mean that an assessment for tax is issued based on the information already held by HMRC.
3. Keep detailed records – Generally business records must be retained for a minimum period of six years. In the absence of detailed records it can be very difficult to defend against an enquiry.
4. Fee investigation insurance – It is a good idea to consider fee investigation insurance at an early stage. If you are subject to an enquiry that is covered by your policy, any accountancy fees for defending the enquiry incurred up to the policy limit will be covered.
5. Speak to your accountant – Lastly but most importantly, speak to your accountant as soon as possible!

If you are subject to an investigation by HMRC and would like some advice, please contact your local Perrys branch.

Article written by Craig Harman