Why Would HMRC Visit Me? Reasons For An HMRC Tax Compliance Check
Keeping good records and filing your Self Assessment tax return on time are two smart moves to help you stay on the right side of the taxman. However, at some point HMRC may contact you to check details about your tax return.
They will not turn up unannounced, but will generally contact you by letter or phone to request information before scheduling a visit. If you have been contacted by HMRC for a tax compliance check, respond as soon as possible, because ignoring this notice without valid reason could result in a penalty.
But if you’re wondering ‘why would HMRC visit me in the first place?’, let’s take a look at three of the common reasons behind inspections:
- Errors on your tax return
Mistakes happen, especially when you submit your Self Assessment manually instead of using tax software. Data that’s been entered incorrectly might catch the eye of HMRC. So, if you spot a mistake, either correct your tax return or let them know immediately to avoid the risk of penalties or investigation.
- Unusual fluctuations in your earnings
HMRC increasingly use ratios and comparing averages to spot discrepancies in income. One indicator that may spark a tax check is large fluctuations in your earnings from one year to the next.
For self-employed people, there may be a straightforward explanation such as peaks and troughs in workflow, ill health or other extended time away from business activity. Ensuring you have a valid reason and records for any anomalies will help if an inspection is required.
- Tipping off
HMRC make it easy for people to report suspicions of tax evasion; this is a great source of information for the taxman, who will usually act on any tip off they receive. As such, make sure you only discuss your financial affairs in private, with people you know you can trust.
Stages of a HRMC tax compliance check
Generally a HMRC tax compliance check is a standard and straightforward process that is nothing to worry about. Here is a brief outline of what you can expect if you receive notification of a compliance check:
- Taxpayer information notice – This will be in the form of a letter or phone call outlining the information and documents required.
- Inspection – You will receive notice of an inspection if HMRC wish to visit you to inspect documents or information.
- Penalties – Once checks are complete, you will be issued with the outcome of the inspection and a notice of any penalties and tax adjustments that need to be made.
The prospect of a tax investigation is daunting, but you don’t need to worry if your accounts are organised and you complete your Self Assessment online using the best tax return software.
To ensure you are keeping accurate records and for advice on how to fill in a Self Assessment tax return, visit SimpleTax today and trial our easy tax software solution.