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Investigation by HMRC: what to expect?

15/09/2016 09:53 am

HMRC inspection is not uncommon but still not the most pleasant procedure that some businesses have to go through. Naturally, it is stressful but if you know what to expect and how to get ready it will not be such a shock. This Right Accounts blog post is especially valuable for small and medium business owners as they are often targeted by HMRC for inspections.

Enquiries’ types and why do you get picked

There are three types of HMRC enquiries:

  • Aspect enquiry. This type of enquiry is dealing with one or several areas of your tax information.
  • Full enquiry. This type of enquiry is inspecting the whole of your tax return.
  • Random full investigation. Small and middle size companies are often targeted for such investigation and it is seen as a way for HMRC to evaluate tax returns of the companies operating in the higher risk areas.

Why are you being investigated? HMRC investigation can be triggered by some inconsistency in your numbers but your company can also be picked randomly. So if you know that everything is in order, there is no need to start panicking.

The procedure of the investigation

  • Business receives an enquiry from HMRC.
  • Business has to respond in writing in 30 days providing the documents and information that was asked by HMRC.
  • HMRC sends the response in 30-60 days. It can be a closure notice or a request for further information.
  • The correspondence is being exchanged until there is an agreement between the business and HMRC or the enquiry is listed before a tax tribunal.


The best way you can deal with such an inquiry is to be always ready and have all the documents in line. Invest time in structuring your accounting records and from time to time check if there are no gaps or inconsistencies.

We also recommend to think about tax investigation insurance. Dealing with HMRC can take months or sometimes even years, and cost quite a lot of money. In such case insurance could save your wallet. But it is important that you take out the insurance cover before the tax return is submitted.

In case of inspection

In case you are unlucky and your company is selected for investigation, here are some important tips that you should take into consideration.

  • Cooperate. Promptly provide all the information that you are asked for. This is really important as sometimes such behaviour can help you avoid penalties even if you have made some mistakes.
  • Do not look at the inspection off-handed. Even if you think that you know how to write a reply or explanation, think twice if you are really an expert in the field and your answer will be suitable. It is better to at least ask for a second opinion from a professional accountant.
  • Do not stress yourself and inspectors. We understand it can be stressful but if you start panicking it will not only cause suspicion but will also distract inspectors from the work they have to do - and they will not be happy about that.