HMRC Local Compliance Investigation - Gilbert Tax

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HMRC Local Compliance Investigation

HMRC tax investigations are normally conducted from three business sections being:

  • HMRC Specialist Investigations
  • HMRC Local Compliance Fraud
  • HMRC Local Compliance

Thus It is possible to make an educated guess regarding the severity of the tax investigation from the name on the letter from HMRC. Tax Investigations can upwards from HMRC Local Compliance to Local Compliance Fraud or Specialist Investigations but never downwards. Specialist Investigations deal with cases of suspected serious tax evasion using the Contractual Disclosure Facility Code of Practice 9 tax investigations. HMRC Local Compliance deal with most other routine tax investigations including:

  • Income Tax Investigations
  • Corporation Tax Investigations
  • PAYE Investigations
  • VAT Investigations
  • Hidden Economy Tax Investigations

If you receive a letter from Local Compliance relating to a tax investigation then they will have some suspicion that all is not right with your tax affairs.

PAYE Investigation / VAT Investigation

PAYE tax investigations and VAT investigations are in effect routine visits in that most businesses will be subject to them at some point. It used to be that all businesses could expect a VAT visit or a PAYE visit about every 3 to 6 years. Although routine visits still occur the VAT investigations and PAYE investigations are becoming much more risk focussed and therefore there will be, in many instances, a suspicion that not all is right with the business subject to the tax investigation before the visit is arranged.

Corporate Tax Investigations

Corporate tax investigation conducted by HMRC Local Compliance usually takes one of two forms that being aspect tax investigation or full tax investigation.

An aspect tax investigation conducted by HMRC Local Compliance is a tax investigation where HMRC are only looking at specific areas of the tax return submitted. For example they may ask for a analysis of expenses for say travel and subsistence.

A full tax investigation is much more serious than an aspect tax investigation. In effect HMRC will be conducting a tax investigation into the whole of the books and records of the limited company and this is usually for one tax year. If tax evasion, or material errors, are discovered in an HMRC Local Compliance Tax Investigation then HMRC will conclude that this has occurred in other years. All full HMRC Local Compliance Tax Investigations are based on risk assessing the business and on information held by HMRC. If HMRC launch a full tax investigation then they consider that there is something wrong with the tax affairs of the entity whom they are investigating.

Income Tax Investigation

As with Corporate Tax Investigations Income Tax Investigations fall into Full Income Tax Investigations and Aspect Income Tax Investigations.

An aspect tax investigation is where HMRC look into specific aspects of the tax return.

In a full income tax investigation HMRC Local Compliance will have done some form of risk assessment and will suspect tax evasion before they ask for the business books and records. If tax evasion is established (whether by not declaring all sales or over claim of expenses) then HMRC will assume that this has occurred in other years.

Hidden Economy Tax Investigations

The hidden economy teams are also part of HMRC Local Compliance. Basically the hidden economy team are tasked with finding people whom are outside of the tax network and who have failed to notify HMRC that they are receiving income which should be declared on their tax returns. Invariably tax investigations conducted by the hidden economy team can be identified by the reference which will start LC/HE. This stands for Local Compliance Hidden Economy.

For more details about tax investigations conducted by the hidden economy team please click here.

The above list is not exhaustive of all of the tax investigations conducted by HMRC Local Compliance but are the main direct tax investigation headings.

What is important to remember where you are notified of any form of tax investigation that HMRC will suspect that there is something wrong or that checking the matter may result in an increase in tax due.

How Can We Help?

Gilbert Tax understands that people sometimes make mistakes in their dealings with HMRC and that HMRC make mistakes in dealing with taxpayers. Many people do not know how to deal with HMRC or who to turn to for help resolve the tax dispute.

Gilbert Tax is a firm of tax advisors who specialise in resolving people's problems with HMRC. We have extensive expertise in dealing with all forms of tax investigations and tax disputes as well as with taking matters to the Tax Tribunal where agreement cannot be reached.

Gilbert Tax deal both directly with the individual who is under enquiry and also work with many firms of accountants supporting them in dealing with HMRC disputes and advising them on how to handle HRMC to get the best result.

The fact is that proper management of HMRC is the best way of reducing the tax, interest and penalty as well as the time taken in resolving any tax dispute.

Gilbert Tax are none judgemental and rigorously defend your position within the scope and parameter of the law. We take control and manage the process to minimise the interruptions that any form of tax investigation causes to an individual's life and business.

For helpful, no obligation and confidential advice call 0800 734 3333

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