With HMRC significantly ramping up compliance efforts in recent months and future investment into additional staff, the risk of a tax investigation is becoming more of a concern for both individuals and businesses. Proactive measures are key to mitigating that risk.
Some steps that can help protect yourself from potential HMRC enquiries include:
Maintain Accurate and Detailed Records
Ensure that all financial records – income, expenses, tax returns – are up to date, complete and backed by supporting documentation. Keeping everything organised makes it easier to respond quickly to any queries. You are required to hold records for 6 years from the end of the financial year they relate.
Work With a Professional
Engaging a qualified accountant or tax advisor can help ensure compliance with the latest tax regulations and reduce the likelihood of errors that might trigger an HMRC enquiry. They can also guide you through the process should you ever be targeted.
Understand Your Tax Obligations
Stay informed about changes in tax laws and HMRC procedures. Knowing exactly what you owe, when you owe it, and how to file properly reduces the risk of mistakes. At Lambert Chapman, our tax department will proactively work with our clients to keep you up to date.
Review Past Returns
If you haven’t already, consider conducting a self-assessment review of past tax returns to ensure nothing has been missed or misreported. If errors are found, you may be able to amend the return before HMRC raises questions.
Prepare for an Enquiry
If you’re audited by HMRC, it’s helpful to know the types of documents that might be requested. This includes things like bank statements, invoices, contracts, and evidence of business expenses. Keeping everything well-organised is crucial for a smooth audit.
Implement Internal Controls
If you’re running a business, setting up strong internal financial controls can reduce the likelihood of errors or fraud. This includes regular financial reviews, proper segregation of duties and maintaining transparency in financial processes.
Consider Voluntary Disclosure
If you do discover an error in your past tax returns, voluntary disclosure might be an option to correct it before HMRC finds it. It can help reduce the penalties associated with errors and demonstrate your willingness to comply. We can help you with this.
Whilst being targeted for an enquiry can feel daunting, preparation and transparency go a long way in minimising both the hassle and any potential penalties.
At Lambert Chapman, clients can subscribe to our Tax Investigations Service. For an annual premium, you can have peace of mind knowing you’re covered for the professional costs associated with an HMRC enquiry.
The scheme for April 2025/26 is currently open and so if this is of interest, get in touch with either myself or your usual contact and we will be happy to help.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.