WHAT IS AN HMRC ENQUIRY?

HMRC enquiry or compliance check is usually an enquiry into your business and the tax returns you have filed. Despite being credible and having done your returns right, it is normal to fear an HMRC enquiry.

Also, HMRC enquiry is done into your R&D Tax credit claims, which verifies your business and its eligibility for the claim.

The HMRC enquiry can be launched into any business’s tax returns and, it is important that you have your tax documents accurate with all the other supporting details up to date. It is advisable to maintain your tax return forms and other tax credit details updated to avoid the last-minute rush. Failing to procure and submit the details may cost you and your business. Hence, it is wise if you practice precaution.

HMRC or the HM Revenue and Customs can open an enquiry into your returns and actually has the right to do so. Also, it may require you to sit personally for the enquiry. Though it is not necessary for you to be physically present, you may even seek professional help from a legal advisor for HMRC civil tax investigations.

WHAT IS THE BASIS FOR THIS ENQUIRY

Your business; may be chosen for this enquiry; based on a variety of reasons. It may include the tax returns you filed or the sources of income mentioned by you. It may also be based on the information in your employee’s tax returns or from any of your property deals undertaken.

Also, if they find any financial discrepancies or any sudden increase in your valuation, they may start an enquiry. When it comes to R&D tax credit claims, if they find your business overvalued to receive the funding, they may launch a compliance check to ensure your eligibility.

R&D tax credits are a source of funding provided to innovators based out of the United Kingdom. It is usually in the form of a subsidy or discount in corporation taxes. It is provided to the innovators who pitch for world-class solutions for common developmental issues plaguing the world at large.

Innovators from any field of development; can claim this funding, and it is essential to check for eligibility before applying.

HMRC ENQUIRY

Sorting out the tax returns to look for anomalies manually is not an option. To keep the system in check, HMRC uses a software program called Connect designed to alert any red flags in the returns filed.

Enquiry by HMRC is usually done as a whole or on a particular aspect that is in question. HMRC usually sends a written notice before it commences with an enquiry. Since it is a standardized process, HMRC usually complies with the due process and will conduct the enquiry based on the set rules.

HMRC has the right to consider your return for the enquiry and can consider your return up to 12 months from the date you have filed it. The enquiry may be conducted, entirely through written posts or, it may also require you to arrive in person at the venue.

Until and unless you receive your letter from the HMRC team, you may not have any idea if the enquiry will be conducted on you. You may have to seek professional help with this process so as to handle it efficiently and with less time.

When summoned for the enquiry, it is prompt to carry with you all the essential documents needed to prove your claim. Also, be sure to understand the rights you possess when you are asked to be present physically. You may even have the right to lodge a formal complaint if it appears to you that the enquiry is not fair and any unfavorable demands are being made.

The duration of the enquiry depends on you and the way you answer the questions asked. It is essential to answer the questions accurately and to the point. This may help in speeding up the process and avoid any unwanted delays.

Despite answering promptly to the enquiry board, if there is any delay with regards to your claim sanction or relief, you may apply to the First Tier Tax Tribunal to direct the HMRC to finish with the enquiry process.

It is equally important to know the possible consequences during the HMRC enquiry. As it is a legal process, it may cause delays ranging from a few weeks, months, and even years depending on your case. This can be reduced by providing prompt answers. It may also cause a reduction in your funding quota, and if the discrepancy is proved, you may end up in the bad books of the HMRC.   

Once the enquiry is formally done, HMRC will send it to you in writing. Try your best to be in the good books of the HMRC by making accurate claims and returns.