If you are facing an HMRC Tax Investigation, you will likely be eager to understand how far back HMRC officers can go with their enquiries and the potential extent of your exposure. The relevant HMRC tax investigation time limit depends on the apparent reasons for any irregularities in your tax accounting and can vary from between four to twenty years.
Our expert HMRC team is comprised of leading solicitors and barristers with considerable expertise in this complex, niche area of law. We specialise in advising individuals, micro businesses, and SMEs on all types of tax and HMRC matters. Our advice is clear, concise, and always has a strong commercial focus, so you can be confident of receiving practical legal support that protects your business interests.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
How far back can HMRC Investigate?
Generally speaking, HMRC must open a full enquiry into a tax return within 12 months from the date on which the return was filed. Once they have opened an enquiry, HMRC officers will seek to identify any issues with your tax accounting. If any irregularities are found, they will seek to establish the reasons behind those irregularities. HMRC is entitled to investigate further back the more serious they believe the reasons for your mistakes are.
The rules governing how far back HMRC can investigate are complicated, and we will advise on the relevant time periods in your case. However, the basic rules are as follows:
- If everything is in order with your tax return, HMRC’s officers will close their investigation and proceed no further.
- If the results of HMRC’s investigations indicate anomalies that appear to be due to innocent mistakes, HMRC is entitled to look into your affairs for the last four years.
- If the results of HMRC’s investigations indicate anomalies that the officers suspect were due to your negligence, the officers may look into your affairs over the previous six years.
- If the results of HMRC’s investigations indicate anomalies that appear to stem from a deliberate attempt to avoid paying tax, they may go back as far as twenty years.
HMRC’s officers may uncover facts during the investigation that change their suspicions regarding the severity of your conduct. For example, it may transpire that an apparently innocent mistake, in fact, resulted from your negligence. In cases like these, the officers are at liberty to extend their investigation and go further back.
How far back can HMRC claim unpaid Tax?
If HMRC’s investigations reveal that you have underpaid tax, it can recover the losses during the relevant period. Given that HMRC is at liberty to investigate a taxpayer’s affairs for the past twenty years if deliberate tax evasion is suspected, it follows that they can claim unpaid tax for a period of up to twenty years.
In addition to recovering the unpaid tax you owe, HMRC issues penalties to taxpayers whose tax returns contain mistakes where those mistakes were due to a lack of reasonable care, deliberate, or deliberate and concealed, meaning the taxpayer took proactive steps to hide their error. The level of penalty charged depends on the underlying reason for the error, with more severe errors warranting more significant penalties.
The levels of penalties HMRC currently charge are as follows:
- Where the mistake was due to the taxpayer’s failure to take reasonable care, the penalty may be between 0% and 30% of the unpaid tax.
- Where the mistake was due to the taxpayer’s deliberate error, the penalty may be between 20% and 70% of the unpaid tax.
- Where the mistake was due to the taxpayer’s deliberate and concealed error, the penalty may be between 30% and 100% of the unpaid tax.
Our expertise in HMRC Investigation time limits
Our HMRC solicitors and barristers have extensive experience advising clients on the HMRC investigation time limits applicable in their circumstances, the extent of their exposure, and the level of penalty HMRC will likely impose where applicable. There are steps a taxpayer can take to persuade HMRC to impose a lesser penalty, such as proactively assisting HMRC in putting things right, and we will advise on the steps you can take in this regard. We can attend your meetings with the officers to ensure they do not exceed the relevant HMRC tax investigation time limit and that everything else they do is within the confines of their powers. We have a proven track record of negotiating excellent settlements with HMRC on behalf of our clients and will seek to resolve the matter as quickly and cost-effectively as possible, and on the best possible terms.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
