Tax investigations: why HM Revenue and Customs might investigate a business

Investigations, as with any other state-run organisation, are a key part of HMRC's regime, but there are steps that can be taken to avoid this

According to HM Revenue and Customs' (HMRC) Annual Report and Accounts 2018-19, the tax authority brought in £627.9 billion in tax revenue for the government during the period covered by the report (HMRC, 2019). More importantly, and of interest to taxpayers with a mind to play fast and loose with the tax rules, HMRC protected its revenues to the tune of £34.1bn and, specifically through litigation, to the value of £17.5 billion.

Checks and investigations are a key part of HMRC's armoury. Indeed, investigations and penalties are, by definition, the backbone of any state-run organisation for without a punitive regime there would be minimal compliance.

Tax investigations should be avoided. They are not something that many welcome or would want to endure, as they are stressful. Furthermore, if HMRC finds misbehaviour, that taxpayer is bound to receive ‘special’ attention in the future.