A relatively recent development by HMRC is to issue letters to taxpayers stating that they wish to make a check on a taxpayer’s tax position. Strictly this is neither an enquiry nor an investigation.
However, such letters should not to be ignored. As the letter will state, the letter has arisen because HMRC are in possession of information or documentation that suggests that the taxpayer may not have declared all of their income and gains to HMRC.
HMRC receive information and documentation regularly from many sources. Sometimes the information is misleading or incomplete and can be readily explained to HMRC. Other times the information and documentation is quite simply wrong.
For many years, financial institutions will send HMRC information about bank interest earned by taxpayers for example. A recent new source is as a result of the Common Reporting Standard (CRS).
Often none. This is where the problem starts.
Under CRS, when HMRC undertakes a check on tax position, HMRC receives the information from overseas tax jurisdictions without any supporting documentation. As a result, HMRC has to trust the accuracy of the overseas financial intermediary and their understanding of the facts.
Firstly seek professional advice from an experienced specialist. It may be that certain facts need to be put into better context without triggering any additional tax liabilities.