How Far Back Can A Tax Investigation Go?

In serious cases, an investigation could go back as far as 20 years. However, in cased deemed less serious by HMRC, an investigation could go back up to 6 or 8 years depending on whether there is an overseas element involved.

If you receive a letter from HMRC which states that you are the subject of a tax investigation, you should seek professional advice. By doing so it will most likely bring the investigation to a suitable conclusion a lot quicker than if you liaised with HMRC yourself.

Our experienced team have helped hundreds of individuals through tax investigations and will be by your side every step of the way to its conclusion. 

If HMRC believes that your declared tax affairs are not correct, and a careless error has taken place (i.e. general negligence, unintended errors and / or mistakes in your tax filing, for example, on your self assessment tax returns) the investigation could potentially go back up to 6 tax years for UK based issues and currently 8 tax years for non UK issues under the requirement to correct rules. For overseas / non UK issues, a favourable disclosure facility is the Worldwide Disclosure Facility (WDF).

HMRC may also pursue people who had previously entered into a tax avoidance scheme that allowed them to mitigate their tax affairs. Over recent years there has been widespread publicity regarding such schemes, most notably involving celebrities and sports personalities. However, many individuals, such as contractors have historically used tax avoidance schemes, many unknowingly.

Tax avoidance is treated seriously by HMRC, although not as serious as when tax evasion is alleged.

If HMRC suspects that you have committed tax evasion (i.e. deliberate under declaration of your tax liabilities) this is considered as serious and could go back as far as 20 years. How far back the investigation goes will depend on the circumstances surrounding the case.

If HMRC opens an investigation into alleged tax evasion, there are options available to help bring this to a smoother conclusion, for example, through the Contractual Disclosure Facility (CDF).

An investigation into tax evasion may also result in criminal proceedings in complex and serious cases. If HMRC opens a criminal investigation, for example, if serious tax fraud has taken place, this could result is prosecution. HMRC has powers to issue warrants, request the production of information, make arrests and to recover assets through the Proceeds of Crime Act (2002).

Our experienced tax team can work in conjunction with specialist criminal defence solicitors and barristers in criminal investigations brought by HMRC.

If HMRC has information or evidence to suggest that careless behaviour, tax avoidance or tax evasion has taken place, it will most likely begin the groundwork of the investigation without even notifying you that you are a under suspicion.

Initially, HMRC will look at your tax records and may undertake a tax compliance check into your affairs.

HMRC has used developments in technology to continue to update their investigation selection criteria. No longer is it based upon local knowledge of the HMRC officer or a hunch. HMRC’s powerful Connect computer system uses information provided by a multitude of different sources from financial institutions (both UK and offshore), other government bodies and in some instances social media profiles. This information is continuously under review and any anomalies are then scrutinised by HMRC officers and considered for investigation.

In addition to the powers afforded to HMRC, there are also transparency agreements in place between tax authorities in over 100 countries to help share information in the fight against tax evasion around the world. Such agreements require financial institutions to provide information about accounts and financial interests held by UK individuals.

As an investigation progresses, depending on the circumstances, it could mean that HMRC looks to go further back through your tax affairs.

If this is the case, HMRC will make further requests for information, which will of course extend the period by which your tax affairs are being investigated.

A tax investigation will be a stressful time for any individual regardless of how many tax years are involved, and indeed how long the investigation itself lasts. The period in which the investigation lasts will very much depend on how much information HMRC requests from you and the issues that have been identified.

Tax investigations will come about for a number of reasons, but key to ensuring that you can bring the investigation to a conclusion is by cooperating with HMRC, and our tax investigations team can assist you in this process. 

We would always advocate that you seek professional advice if you are facing a tax investigation.

Our tax investigations team assists individuals through HMRC investigations. We will thoroughly assess your individual circumstances and liaise with HMRC on your behalf. Our input can ensure that the outcome of the investigation is properly negotiated and any tax to be repaid is accurately quantified.

Following a tax investigation, it is also vitally important that you keep your tax affairs up to date going forward. Our team can continue to assist in this regard by giving you tax compliance support and we will discuss this with you when your tax investigation has reached a conclusion.

If you are worried about the prospect of HMRC opening an investigation into your tax affairs, you should seek professional advice. 

There are a number of voluntary tax disclosure options available to help bring your tax affairs up to date with HMRC and, in this process, we can also help negotiate payment terms. HMRC often views individuals who come forward to make tax disclosures more favourably than those who face a tax investigation.

In the Tax Disclosures section of our website, there are a number of different disclosure facilities explained. Over the years we have assisted many individuals through tax disclosures, both UK residents, and those living abroad in countries such as Spain, Cyprus, Australia, South Africa, New Zealand, the US and many more.