What to Expect in a HMRC Tax Investigation

1. What to Expe What to Expect in a HMRC Tax ct in a HMRC Tax Investigation? Investigation? While HMRC is unlikely to win any awards for speedy call response any time soon, it is certainly skilled at investigating those who they believe are not paying the correct amount of tax. FBR is one of the most powerful organizations in Pakistan responsible for collecting due taxes with advanced tools and tactics. To represent your firm in front of FBR, we offer extensive range of tax representation services in Islamabad. What motivates an investigation? What motivates an investigation? HMRC claims compliance checks are usually initiated when figures on a return appear to be incorrect in some way. If a small business suddenly makes a large VAT claim, or a large business declares a very small amount of tax, HMRC will most likely be alerted. However, there are some other factors that, according to our experience, may lead to a business becoming the subject of an investigation:

2. •The HMRC receives a tip. •You work in a high-risk industry, such as one that accepts cash payments on a regular basis. •You have a significant decrease in income, an increase in costs, or inconsistencies between different returns. •You consistently file your returns late. •Your prices are higher than the industry average. •Your tax returns do not correspond to your standard of living. •You work in a sector that HMRC has identified as a priority. It is important to note, however, that investigations can be completely random. What types of business taxes does HMRC look into? What types of business taxes does HMRC look into? Many different types of business taxes can be investigated; it is not, contrary to popular belief, limited to income tax. Other areas of taxation that can be researched include: •Tax on insurance premiums •Tax on landfills •Capital gains taxation •Levy on climate change •Construction industry plan •Corporation taxation •VAT What kinds of investigations exist? What kinds of investigations exist? HMRC inquiries are classified into three types: full, aspect, and random. During a full investigation, HMRC focuses on cases where it believes there is a significant risk of error in the tax return. A review of all records will be conducted in this type of investigation. This includes both personal financial records of Directors/Business Owners and business records. If your company is the subject of an aspect enquiry, HMRC is concerned about a specific part (or parts) of your accounts and wants more information. In most cases, the outcome indicates a genuine error or misunderstanding rather than

3. deliberate attempts to evade tax. This type of investigation should not be taken lightly and should be treated with the same seriousness as a full investigation. The third type of inquiry is purely speculative. HMRC simply selects a group of businesses at random to investigate. What happens if HMRC decides to conduct an What happens if HMRC decides to conduct an inv investigation? estigation? If HMRC decides to conduct a tax investigation, you will be required to provide the information requested. However, if you believe HMRC's reasoning is incorrect, you can challenge the decision to investigate. The remainder is in the hands of HMRC, who will investigate what caused the anomaly – more often than not, it is due to a minor discrepancy, and the case is quickly closed. However, some cases may necessitate a more thorough investigation, and HMRC may request additional information. Wha What are the possibilities? t are the possibilities? What happens next is determined by what HMRC discovers. Some of the most common outcomes and solutions are as follows: Overpayment of tax Overpayment of tax In this case, the taxpayer will receive an interest-bearing tax rebate. Unpaid taxes Unpaid taxes As a result of this outcome, the taxpayer will be formally required to pay any tax owed within 30 days, possibly with interest. Intentional wrongdoing Intentional wrongdoing If HMRC conducts a tax investigation and concludes that the taxpayer engaged in deliberate wrongdoing, the case may be escalated to criminal status. If this occurs, you may be required to pay a penalty. The amount will be determined by factors such as why you underpaid or overpaid tax, whether you informed HMRC of any errors as soon as possible, and whether you were cooperative throughout the investigation.

4. In addition, we have an Accounting website with the domain name Accotech, which provides accounting services in the country of Pakistan. Taxation, bookkeeping, payroll, VAT, and other accounting services are available in the Website.