Company tax investigations

If the taxpayer company submits its return on time, HMRC will normally have 12 months from the statutory filing date (12 months from the day on which HMRC receives the return) in which to start enquiries into the return. HMRC will inform the company in writing when an enquiry starts.

An investigation into a company’s affairs can be a difficult and time consuming process and can extend into a full scale investigation of a company’s financial books and records. For smaller companies, where errors in the financial records are identified, HMRC may widen their enquiries to encompass the personal tax affairs of the directors of the company.

When HMRC’s enquiries are completed, they will inform the company in writing with a ‘closure notice.’  If HMRC discover that there are no errors in the return submitted by the Company they will confirm that their  enquiries have finished. If, however, they form the view that any adjustments are needed to the company’s return, they will state this in the closure notice. If adjustments are required and the taxpayer company agrees with HMRC’s figures, they will ask the company to amend its company tax return. The company will have 30 days in which to do so. If the company does not do this within 30 days, HMRC will amend the return for the period under enquiry, and for any other period, to give effect to the changes they think are needed.

An important safeguard for a company faced with a long running HMRC investigation is that, where the company thinks that there are no reasonable grounds for an enquiry continuing, it can apply to the First-tier Tax Tribunal to consider whether the enquiry should be closed.

It is important to remember that, if HMRC find errors in the company tax return or other records they may, as part of the conclusion of the investigation process,  issue the company with a penalty notice.  A penalty notice may, for example, be issued where HMRC discover errors in the company’s financial records, even if the mistake was due to carelessness rather than any deliberate behavior on the part of the taxpayer. Such penalties can be for substantial amounts.

In dealing with HMRC company tax investigations, there is no substitute for experience. Levy & Levy have in depth knowledge of the legal powers of HMRC’s compliance check teams and can be on hand to offer practical advice to ensure that a compliance check goes smoothly and with minimal business disruption.