HMRC holds a wealth of information on all taxpayers. Not surprisingly though, from time to time HMRC can come across information on a taxpayer that they did not expect. You may think that you have disclosed everything but now HMRC is challenging you and want to investigate your tax affairs.
What type of letter have you received?
HMRC can take a number of different stances in writing their letter. They can either be on a fishing exercise or be direct and straight to the point.
Have you participated in a tax avoidance scheme? Are you connected to an overseas entity? Have you forgotten to tell HMRC about some income or gains? Who else has HMRC written to?
Lots of questions. And HMRC will be wanting to ask you even more. Suddenly you feel the eyes of the whole world on you. You need help, with discretion.
If it is a direct challenge, HMRC will quote the tax year(s) concerned and the appropriate tax legislation according to whether it is a personal matter or company matter etc.. Moreover, HMRC’s language will be clear and say that they are making enquiries and launching an investigation into your tax affairs.
Every year HMRC will make direct challenges on a tax return and these can be quite straight forward. But if HMRC are quoting Code of Practice 9 and the Contractual Disclosure Facility, seek specialist advice urgently.
Code of Practice 9 and the Contractual Disclosure Facility
For HMRC to launch an investigation under this heading, HMRC are quite sure of their facts. Those facts make them believe that tax fraud has been committed and there has been an underpayment of tax as a result.
They may be right, then again HMRC may be wrong. But until you seek specialist advice, no doubt your thoughts are all over the place – tax fraud!
What is tax fraud?
The intention to deceive. You cannot commit tax fraud accidentally by mistake. It is a deliberate act.
It is a very strong accusation that is being made and not one taken lightly by HMRC. What you do next will dictate how matters will be handled going forwards.
You may wish to accept the offer of the Contractual Disclosure Facility (CDF) and reach a Settlement on a civil basis. CDF is a process that will be followed until its conclusion.
What if HMRC have got it wrong?
We are all human and can make mistakes. HMRC is not infallible but it is rare that they make a mistake. But they can misunderstand the facts or act upon on only some of the facts and make 2 + 2 = 5. Or way, way more.
Check on tax position” or quote Code of Practice 8
Whilst in my opinion these can be fishing exercises it is often the case that a tax irregularity is discovered. It may even be that matters are escalated to being tax fraud. Here you need to be careful because the CDF is under Code of Practice 9, not Code of Practice 8. A big difference.
What should you do next?
Seek specialist advice. Show the letter to a specialist like me and I will ask you questions and then base my strategy for going forwards with HMRC on your answers. It’s personal to you – nobody else. There is no off the shelf answer.
Be very careful. HMRC is challenging you. Tax investigations at this level are not for the faint-hearted.
Why not give me a call now on 07979 313 010 and get it sorted out?