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Preparing for HMRC investigations 

An HMRC investigation is a painful, expensive, unpleasant and time-consuming experience. There are various reasons why your business might be selected for an investigation and, whatever the reason, the whole experience can take up to 16 months and cost upwards of £5000.  


Accounting Representation 

Business owners that feel they can do it all by themselves run a risk of being chosen for an audit or investigation. Although this is not a rule set in stone it is one of the most common denominators for businesses investigated by the HMRC. The logic behind this is that if a business owner is filling his taxes without a third-party VAT consultant input it might be for a couple of reasons. The first is, they might not want a third party to see finances, which suggests fraud, the second reason is the chances of making mistakes are greater when the account is not done by a professional.  

It is for this reason that many businesses choose to hire professionals to take care of accounts and bookkeeping. At Makes Sense Accountants, we can take care of your accounting, payroll, tax planning and much more. 


Inconsistent Figures 

HMRC can calculate expected earnings for most industries, and have records to create reliable estimates. Consequently, if you submit your taxes with inaccuracies and unexpected figures, then you are likely to be investigated. 


Specific Industries 

Certain industries that deal with lots of cash payments, for example: barbers, taxis and fast-food restaurants might be subjected to more than the average amount of investigations and audits. This is because it incorporates higher instances of risks of tax evasion and bribery. 


Preparing for HMRC investigation 


VAT reclamation  

The first thing you should do is make sure you are claiming VAT correctly. This is because if your VAT claims are incorrect then you can be proven to be committing VAT fraud and could receive up to seven years in prison and a fine of up to £20,000. Some businesses have taken to avoiding the whole process all together, although this means you’re reducing the risks of being investigated, you’re also walking away from money. 



Small/Medium Enterprises are subjected to an audit approximately once every six years. It typically takes an average of three months for most companies to prepare for an HMRC audit. The company would need this time to prepare information of auditable account, corresponding receipts, expenses, claims, proof of approvals and legitimate expense claims. 


Payment Process 

The investigators will also need to see your payment process. You must prove that your payment process cannot be tampered with and know exactly who has access to it.  


Approval Process 

Most businesses will have an approval process in place, but that is not to say it is the correct approval process. You need to think about who needs to review expenditures and make sure that the process is visible and transparent. 

How do I Protect Myself and Business? 

At Makes sense Accounts we cover all our clients under our tax investigation policy. This pays their personal and business fees in the unlikely event HMRC pick them for an investigation. I say unlikely because all my clients get proper advice and HMRC system won’t be triggering any alarms from their submissions. 

If you need any advice on avoiding a tax investigation or how to get your accounts in order, You Know it Makes Sense to give me a call. 

Sam Jacka

Author Sam Jacka

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