When you run your own business or are the head of a corporation, there are fewer things that will be more unnerving than receiving a letter from HMRC stating that you and your company are about to be investigated.
But it is important not to panic and it is important to figure out the type of investigation that is going to occur, as HMRC typically has 3 different types of tax investigation and they do not all equate to the same thing.
In this article, you will be introduced to these 3 types of tax investigation, what they mean and how to respond to them, along with some advice on how to avoid being investigated in the future by HMRC and the potential legal outcomes.
Aspect
An aspect investigation according to a fraud solicitor is when HMRC seeks to assess one or more areas of the information you have provided in a tax return.
The most common reason for this is that something has simply been filled in incorrectly, or that there is a piece of information missing and the tax return in its fullest form does not make sense. It is important to seek legal advice if you are subject to an aspect investigation and you should cooperate with any guidelines that are put in place by HMRC during the investigation.
Full
A full investigation from HMRC is a bit more in-depth and can go back as far as 20 years. The entire tax return is to be reviewed and this may also involve HMRC looking into your finances.
As you can tell already, this is a bit more serious and will usually be the result of continuous issues with your tax returns, a tip-off, or a potential link to criminal activity through yourself or your business. Once again, you will need to seek out the advice of a solicitor to help you with this and it is advisable to cooperate fully and stick to any guidelines set down by HMRC.
Random
Next is the random check. This is not as serious as the previous 2 and is simply that they are aimed at higher-risk tax areas or sectors, but generally speaking, it is not because there is an issue on your tax return. It is almost HMRC checking that you are filing your taxes correctly, but if you have concerns, you will still need to seek the advice of a solicitor and it should still be taken seriously.
Tips to avoid investigation in future
If you have been subject to a full or aspect investigation, you must avoid this recurring in the future. One of the best ways to do so is to hire either a solicitor who specialises in fraud to help you or an accountant who can assist you in keeping your books and preventing errors from occurring.
Potential outcomes
If there are any errors found or complications that arise during any of these investigations, you will need to seek out further legal advice. Please note that there may be court appearances involved and hefty fines depending on the issues that the investigations uncover.
