In 2016-17, HM Revenue & Customs (HMRC) brought more than 1,200 cases before a Tribunal – recovering more than £15 billion in tax.
Receiving a letter from HMRC often comes as a shock to business owners, which is why it pays to seek advice straight away.
Worryingly, any individual or business can be targeted by the tax authority at potentially any time and HMRC is not required to provide a reason for launching an enquiry.
Where a person or business selected for investigation, HMRC will write to them to inform them of the impending enquiry, usually requesting that they respond within 30 to 35 days – it is important to respond to any written requests received from HMRC within good time, to ensure that hefty penalties are avoided.
There are two main types of HMRC investigation:

• An ‘aspect enquiry’– which may only focus on an individual aspect of your tax return and is likely to be resolved much more quickly.

• A ‘full enquiry’– which is more detailed and may require you to provide HMRC with full and comprehensive business records for the entire year of enquiry.

Depending on the type of investigation and complexity of the matter, it could take anywhere between three and 18 months to resolve – although it is not uncommon for cases to drag on for years.
In light of this, it is wise to take out fee protection insurance against HMRC enquiries, which will cover any professional fees that the business may incur in instructing an accountant to help them. In most cases this type of insurance will cover any professional fees incurred should an investigation arise.
If you are unsure of whether you would really benefit from fee protection insurance it is important to consider that the primary objective of HMRC’s current Business Plan is to maximise revenue, with a focus on recovery of unpaid tax.
Investigations have become more aggressive and time-consuming in recent years as a result and can often take many months or even years to conclude.
Aside from the time lost digging out historical information and attending meetings with tax inspectors, the financial costs in mounting a defence soon add up. This is why it is wise to make sure you are protected.
If you are facing an HMRC investigation or are interested in securing fee protection insurance to ensure your professional costs are covered should one arise, speak to Grunberg & Co today.