It’s a good question. After all, if you and your business is faced with an enquiry from HMRC, you might be struggling to understand all their jargon. You might be struggling to understand why this process has started in the first place.
The first step? Breathe. Because even if you see an HMRC enquiry as bad news, soon, you’ll be back on track. We can get this sorted.
It all starts with your self-assessment.
And if you’re faced with an enquiry or an investigation of any sort, unfortunately, they think something’s wrong with the information you’ve provided.
Which is a lot scarier than it sounds.
Of course, the enquiry itself does have a scary objective: to detect fraud. What’s lesser known, though, is that HMRC often performs enquiries to test their own system. Because if lots of taxpayers are making the same errors, it’s not exactly your fault is it? It’s HMRC’s.
Still, even if we fix whatever problem your faced with, an enquiry from HMRC needs to be taken seriously.And that’s regardless of how the enquiry itself is categorised, be it ‘full’, ‘aspect’, or ‘random.’
Hang on. Let’s break these terms down, shall we?
A full enquiry: an investigation into every aspect of your self-assessment tax return, (and sometimes your other monetary affairs) to get the full picture of your income and finances.
An aspect enquiry: an investigation that relates to one or two entries in your return. Remember, though, an aspect enquiry can soon turn into a full enquiry – especially if we don’t get things in order.
A random enquiry: Speaks for itself, doesn’t it? These enquiries are the HMRC randomly selecting a small number of returns, just to test their system. And, I suspect, just to scare us a little! Still, it’s important to remember: random enquiries are treated by HMRC officers with the same seriousness as a full enquiry.
So what does that mean for you?
It pays to prepare.
Some accountants treat all full enquiries as random enquiries – or even something they shouldn’t worry about at all. This isn’t the way to think. Even if you’re facing a random enquiry, if your accountant seems a little too impressed with their own ability to avoid errors, tread carefully. Instead, use the opportunity of a random enquiry just to double-check your returns are spot on. Because if they aren’t?
Well, you can work out the rest…
So, as you can see above, all enquiries should be treated seriously.
But WHY have they opened an enquiry in the first place?
It’s another good question. And, it’s easy enough to answer: HMRC think something’s wrong with the information you’ve provided.
And even if your returns are picture perfect, sometimes, HMRC may open an enquiry ‘for cause’.
I know, I know.
Simply put, an enquiry that’s been launched ‘for cause’ is an enquiry into an irregularity you or your accountant may have missed. In fact, you may be alerted to these kinds of irregularities before an enquiry is launched in the first place. So if you get a call from HMRC to clarify your self-assessment return, not only will there be no formal enquiry notice, it could lead to the full enquiry anyway.
So what can we take away from this?
To conclude, an HMRC enquiry can be launched for one of two reasons: to detect fraud or irregularity in your self-assessment returns, or to test their system.
Either way, HMRC will treat all their enquiries with the same level of seriousness. Whatever the categorization.
So if you’ve been chosen for an enquiry, it’s time to take a deep breath and prepare.
It’s time to pull out that fine-toothed comb, ready to triple-check your returns. Because however much information HMRC require, if you don’t provide it, problems will arise.
Problems which can be solved simply. Stress-free, too.
But that’s a post for another day.
Either way, we hope that clears things up. But if you’re still feeling a little worried about an HMRC enquiry?
Get in touch. And we’ll give you peace of mind.
The Tax Haven.