Income Tax investigations

Investigations into personal and partnership self assessment returns are mainly directed towards self employed people who run their own businesses. The enquiry will normally original from your "Local Compliance Office" who will send you a copy of their Code of Practice 11. There is extensive narrative about enquiries into businesses in the general introduction section "Common areas of Concern".

HM Revenue and Customs are expected to police all sectors of the UK tax base and a very small number of enquiries are selected on an entirely random basis. It is not uncommon to see letters to individual taxpayers which assert that "information is held which indicates that your tax return may not be complete". More often than not this relates to bank interest from an account which has been accidentally missed off the self assessment return. All UK banks have to make annual returns to HM Revenue and Customs showing who has been paid interest. With advances in information technology, this data is available to officers at the push of a button.

A great deal of other information is passed to HM Revenue and Customs on a routine basis. Housing benefit payments to landlords for example. Dividends from UK companies are another. If you receive a direct challenge from HM Revenue and Customs asking you to consider whether your tax return is indeed correct, then we would suggest that you should initially check to see if you have missed off something obvious. If the amounts involved are small then you or your accountant can almost certainly proceed to deal with the matter directly with the officer who has written to you. If you have missed a large item off your tax return such as a substantial Capital Gain then it would be prudent for you to take specialist advice about disclosing this to HM Revenue and Customs.

If you have been in receipt of income from an undeclared source or business for many years then you should certainly consult with us in relation to your position. Section 144 Finance Act 2000 introduced a new criminal offence of "Fraudulent Evasion of Income Tax" which has been used most prolifically against so called "ghosts" ... small scale cash oriented businesses which were unknown to the authorities.