HMRC Investigations

HMRC Investigations

HMRC (His Majesty’s Revenue and Customs) in the UK conducts different types of investigations to ensure compliance with tax laws. These investigations vary in their scope and seriousness.

Here are the main types of HMRC investigations

Full Enquiry

  • The scope is comprehensive and detailed. HMRC looks at the entirety of your tax affairs, not just a single issue.
  • Typical targets are often individuals or businesses where HMRC suspects serious discrepancies or fraud.
  • Common in: Self-assessment tax returns that seem inconsistent or under suspicion.

Aspect Enquiry

  • The focus is on a specific part of a tax return (e.g., one source of income, a particular expense, or a claim).
  • Typical targets are Tax returns that trigger red flags, such as large or unusual claims.
  • This enquiry is less intrusive than a full enquiry but can escalate if problems are found.

Random Check

  • These are randomly selected by HMRC, even if no specific risk is identified.
  • The purpose is to ensure general compliance and act as a deterrent.
  • It will normally cover Income tax, VAT, PAYE, Corporation Tax, etc.

Specialist HMRC Investigations

COP8 Investigation (Code of Practice 8)

  • This is used when HMRC suspects serious tax avoidance, not necessarily fraud.
  • It is handled by Fraud Investigation Service (FIS).
  • The purpose is to recover unpaid tax due to complex avoidance schemes.
  • This is not a criminal investigation but can still be intense and far-reaching.

COP9 Investigation (Code of Practice 9)

  • This is sent when HMRC suspects serious tax fraud
  • It is dealt with by Contractual Disclosure Facility (CDF) — you’re given a chance to admit fraud in exchange for immunity from criminal prosecution.
  • It is Handled by the Fraud Investigation Service (FIS).
  • Failure to cooperate may lead to criminal prosecution.

VAT Investigations

  • These focus on VAT returns, registration, reclaiming input tax, etc.
  • These are normally routine or triggered by suspicious activity like repeated refund claims.

Employer Compliance Checks (PAYE & NIC)

  • These are focused on PAYE records, benefits-in-kind, NIC payments, etc.
  • The common discrepancies in employee records or expenses.

Corporation Tax Investigations

  • Targets are companies suspected of under-reporting profits or inflating deductions.

What Triggers an HMRC Investigation?

• Discrepancies in returns.
• Late filings or payments.
• Anonymous tips or whistleblowers.
• Data matching from other sources (banks, overseas authorities).
• Unusual patterns or large/unexplained transactions.

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