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If HMRC determines that an employer has abused the scheme, then at the very least, they will expect the overpaid amounts to be returned along with interest. There is also a strong likelihood that a range of financial penalties will be chargeable to that employer, with deliberate misuse attracting higher penalties than careless ones. In the worst cases, HMRC is likely to seek to investigate criminally.

If you would like to have a free consultation with a tax specialist, please call us on 03300 88 6686 to speak to a tax specialist.

One important way to minimise the risk of becoming a target for investigation is to make sure your personal tax return and company accounts are always delivered to the appropriate agency (Companies House/HMRC) on time. Another way to avoid suspicion is to use the dns online accounting portal, employ a good accountant, keep hold of receipts and be scrupulous about correct reporting. Another thing, never ignore any correspondence from HMRC.

No. HMRC randomly selects a proportion of tax returns every year. In the first two years of self-assessment, some 15,000 returns were investigated. HMRC will write to you to let you know that your affairs are being investigated although it will not normally give the reason behind its decision to launch an enquiry. Under the self-assessment regime, the Revenue must start any enquiry within 12 months of the last filing date of 31 January but there is no requirement for an investigation to conclude within a fixed period of time.

If it is found that a tax payer has intentionally misled the tax authorities, punishment can be severe: prosecutions, jail sentences and stiff fines designed to recoup the unpaid tax and penalties.

In cases where minor amounts of income have been undeclared or where small mistakes have been made on the return, normally the matter can be cleared up with a few phone calls and submission of relevant pay slips. If the problem appears to be a simple one of omission, HMRC can ask the tax payer to answer specific questions or provide documents that might answer the question. If it is discovered that tax has been underpaid, the taxpayer will have to pay what is due plus any penalty or interest accrued. Where serious fraud (amounts of more than £50,000) is concerned, HMRC can start to request information from banks, accountants and other parties if it is the tax inspector’s “reasonable opinion” that this will help the investigation.

In serious cases of fraud, HMRC can bring in the Special Compliance Office, an elite unit responsible for the most high-profile investigations. The SCO has the power to negotiate settlements and can also agree not to prosecute a taxpayer as long as full disclosure is made.

Yes, but taxpayers’ affairs are confidential and information will only be disclosed to people that the individual agrees it may be given to, such as dns or another adviser. But, HMRC can ask former employers, customers, suppliers or colleagues for information relating to its investigation

Yes, of course, but you may have to go back through the whole accounts’ years (legally you must keep six years), and to collate this and submit it all is quite a job if you are still trying to run a company.

Yes, if you have subscribed to our Tax Investigation Service we will look after searching, collating, submitting all the documents requested and required. We will liaise with the tax authorities on your behalf and help you every step of the way. You will also have access to a legal helpline to make your tax investigation work easy.

There is an article on our blog. Or you can visit the HMRC website for more detailed information.