Nobody likes tax investigations. However, if you are selected for a one, you need to stay calm and get plenty of information about such investigations.

So, what are the commonly asked questions about tax investigations? To find out, you need to read the pointers below.

What is a tax investigation?

Tax investigation is a thorough investigation done by the authority to recover the unpaid taxes. In the UK, HMRC send officers for tax investigation compliance checks if they suspect any deceitful activity or an obvious arithmetical mistake.

What should I do when I receive a tax investigation letter from HM Revenue & Customs (HMRC)?

When you receive a tax investigation letter from HMRC, do not panic and read the letter carefully. If you do not understand the information written in the letter, seek professional help from accountants immediately.

Why was I chosen for an investigation?

Different things can trigger an investigation. It can be either random or deliberate attempt to pay less tax. Moreover, if your income is dramatically high or low and you claim high expenses, then these things also give HMRC a reason to investigate you.

Do I need to choose a good tax accountant/adviser?

If an investigation has been opened up to you, you need to hire an expert tax accountant to help you with many things. Whether you need to send correct information to HMRC, help in negotiating settlements for interest and penalties and deal with requested information from HMRC, accountants will provide expertise on all these matters.

How many years can HMRC go?

It usually starts at four years which can further go back to six years if your errors are proved to be result of your carelessness. And, if your errors are proved to be deliberate, HMRC can go back to twenty years.

Will I go to prison for a tax crime?

If you have committed a deliberate fraud, then you can be prosecuted and can go to prison for tax crimes. However, HMRC usually search for civil penalties.

What are the penalties for tax investigation?

The penalty is a fine charged for underpaying your tax. It can depend on the level of your behaviour. If you have deliberately concealed your income, you can suffer higher penalty. On the other hand, if there is an unintentional mistake, the penalty can be slightly reduced.

What information does HMRC ask during the tax investigation?

HMRC can ask any reasonable, supporting documents that are related to the tax returns. They will send you a letter which explains what they exactly need from you.

What control do HMRC have in a tax investigation?

HMRC has the power to request and acquire information from you. What’s more, they can even issue determinations in case of they do not experience co-operation from you and the concerned parties.

What should I do to protect myself from the cost of investigation?

To protect yourself from the cost of tax investigation, consider taking out insurance or join a business association offering such insurance benefit.

Will being investigated before can put me under investigation again in the future?

If you are found to continue the same errors like before, then HMRC will investigate you again.