What Triggers a Tax Investigation in the UK?

Estimated read time 3 min read

In the UK, HMRC is authorized to conduct compliance examinations. Tax audits typically occur every five years though some 7% of tax inspections are triggered randomly.

HMRC has gained more authority throughout time to combat tax fraud, avoidance, and underpayments successfully.

Most checks are triggered by HMRC’s Central Risk team, which uses sophisticated data mining tools to spot strange activity on accounts or trends in particular businesses.

You should always take the help of HMRC civil tax specialist advice in London to manage the investigation on your behalf.

The Following Are the Primary Causes of a Tax Investigation:

  • Inaccurate Figures: It is triggered by figures that appear wrong or faulty—for instance, a large company with a substantial turnover declaring a minimal tax.
  • Suspected Activity: Any suspected activity in your tax records or accounts could flag you for an HMRC tax compliance investigation.
  • High-Risk Business: Many businesses can be investigated, though those in a high-risk industry and those that deal with cash run the danger of receiving HMRC investigation letters to start proceedings.
  • Whistleblower: HMRC being informed of unusual activity in your accounts by someone.
  • Discrepancies: There are noticeable inconsistencies between tax returns (e.g., a significant fall in income from one year to the next).
  • Crossing Deadlines: Often filing tax reports after the deadline with continuous errors.
  • Crossed Industry Standards: Your accounts don’t follow industry standards and your company costs are above the norm.
  • Specific Sectors: HMRC has targeted your industry because your company operates in a high-risk sector like construction or real estate development.
  • False Representation: Your tax returns are inconsistent with how busy your business is or your standard of living.
  • Offshore Account: Have offshore bank accounts.
  • Income Source: You have income from the property.
  • Investment Schemes: You have invested in schemes or funds HMRC views as tax avoidance investment schemes.
  • Taxes Targeted by HMRC: However, it can also refer to other taxes, such as corporate tax, VAT, landfill tax, climate change levy, capital gains tax, and insurance premium tax, to mention a few.

How Can You Deal With Tax Investigations?

Expert Advice: As soon as you learn about a tax audit or probe, you should get specialist advice.

Accountant Support: You might want to contact your accountant to review your records and processes if you face a tax audit.

Accurate Information: If you have accurate, current information on hand for the inspector to review, the tax audit will go more quickly, smoothly, and with a lower likelihood of fines.

Guidance: It is wise to get expert advice on how to respond to information and documentation requests for a tax investigation.

Documents: Instead of speaking with the tax inspector on the phone or in person without company, you might find it advisable to handle as much as possible in writing through your accountant.

Fabricated Evidence: You cannot forge or remove evidence. It is only likely to result in harsher punishments.

Contribution in Account: To lower the unpaid interest amount, you should consider placing contributions on account towards any potential tax liability.

Goal: Your goal is to reach a deal for the least amount of money possible.


In one of their most recent reports, HMRC asserts that the tax gap has been steadily shrinking over time and reached its lowest level of 4.7% for the 2018–19 tax year. Giving incorrect figures on a tax return is the most frequent reason for an investigation.

Your accounts may be selected randomly for investigation, even. Therefore, it is preferable to speak with an accountant who can provide expert advice on your finances and review your tax forms before you submit them.