Whether you’re self-employed or own a limited company, taxes are necessary for every business. However, the process can be complex and stressful, particularly for those who are just starting out. One of the more intimidating aspects of taxation is the potential for a compliance check from HMRC. Compliance checks are investigations, which can be triggered for a variety of reasons. Ranging from an indication of fraud to a simple mistake on your return. The vast majority of compliance checks are going to be quick and painless, with no issues. However, that doesn’t mean the overall process doesn’t cause discomfort for the business owners involved.
With this in mind, what is the best way to survive a compliance check from HMRC?
Who is Targeted?
Upon hearing that you or your business are facing a compliance check, the first question you may ask yourself is- why me? HMRC use these investigations as a way to identify fraud and tax evasion and therefore recoup any losses. The problem is that it in many instances, it can be a relatively blunt tool. You could be forgiven for assuming that all compliance checks are triggered due to tip offs or hard evidence of fraud but they’re normally in the minority. The majority of investigations happen due to a simple mistake in a tax return or because a business operates in a high risk area.
There has also been a noticeable uptick in compliance checks from HMRC in recent years. This is due to a number of different factors, including policy from the government and as a consequence of tax changes during the pandemic.
With this in mind, it’s important to recognise that you’re more likely to face a compliance check now, then ever before. Plus, if and when this does happen, it doesn’t automatically mean you have done something wrong.
Don’t Panic
Being on the receiving end of an official investigation from HMRC can strike fear in even the most experienced business owner. However, panicking will only make the process worst and could lead to costly mistakes. Try to remain calm and if you have any questions, you can contact HMRC directly. Although it often doesn’t feel like it, they also want to make the process as fast and painless as possible.
Cooperate
When under investigation, it can be easy to feel defensive, especially if you’ve done nothing wrong. However, the best way of expediting the process is by being as cooperative as possible. This means keeping the channels of communication open, providing any evidence that is requested and of course, remaining civil. HMRC may request a meeting to discuss the case and although you aren’t legally obliged to accept, it will help your case if you do.
Not only does cooperation make the process faster, it can also reduce any penalties that you may face. For example, if you have made an error on your return, HMRC may reduce or even wave the penalty, if they feel as if you’ve cooperated.
Appeal
Obviously, there are instances in which a business will disagree with the judgement made from HMRC. In these circumstances, you can appeal- in fact they have a number of different options available. Within 30 days, you can:
- Provide additional information or evidence to help your case.
- Have the case reviewed by a different officer who wasn’t involved with the initial investigation.
- Take your appeal to an independent tribunal.
Seek Help
As we have established, compliance checks can be stressful and sometimes, external help is required. Whether during the investigation itself or in the immediate aftermath, there is help out there. You could work with an accountant or a third-party who specialises in this area. Taxation Investigation offer expert solutions for those dealing with taxes and compliance checks. More information can be found on their website, or you could just contact them directly.
