

The total revenue HMRC generated from tax investigations and other compliance activity increased to £30.8bn in 2021. This was up from £28bn in 2020. The rise was attributed to tax lost to evasion or avoidance during the pandemic.
In this guide, we’re looking at what a potential increase in tax investigations means for your business and how you can prepare for a potential audit.
In reality, tax investigations or audits shouldn’t be too onerous if accounts and bookkeeping have been maintained accurately and efficiently from the offset.
When would you be part of a tax investigation?
On average, tax audits can be expected every five years. Only a few percent of corporation tax returns are investigated each year. If HMRC suspects that tax is being underpaid, the likelihood of an in-depth tax investigation increases.
You will always be notified by post if your business is to be subjected to a tax investigation.
HMRC will prioritise their attention on larger businesses, but all companies are susceptible. Common reasons for investigation include: omissions, mistakes and inconsistencies, your business is part of a HMRC target sector, or frequently submitting tax returns late.
What does the process involve and how can you prepare?
An accountant will be able to read through the correspondence and explain in layman’s terms why your company is being investigated and which areas are being targeted for review. If HMRC wants to conduct a full review, you’ll need to submit your financial records.
Smaller tax investigations usually take between three and six months. A full-scale investigation can take up to 16 months to complete.
If you would like assistance with tax compliance or preparing for a tax audit or investigation, Ratiobox can help. Contact us today to arrange your free initial consultation and discuss our outsourced accounting services. We specialise in a range of business sectors, including retail, construction and healthcare.