Tax Investigation, how far back can HMRC go?

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How far back can HMRC go !!

After HMRC have opened their investigation into their initial enquiry year ,they may want to open earlier years if tax has been underpaid in the enquiry year. So how do they decide how far back to go! Well strictly as far back as the undeclared income has been omitted but in in reality negotiations between your specialist adviser and HMRC will come to an agreement and settlement in a civil settlement.

Here’s an idea of how they look at your situation :-

  • If there have been no errors and your paperwork and accounting is in order they are not allowed to look into earlier years – though they may still try it on so beware!
  • If there has been a mistake (and you can prove this is not down to your negligence) then they can go back four years.
  • If the underpayment has been made because of your negligence (for example you weren’t keeping proper records) HMRC can go back six years.
  • If HMRC believe you have deliberately set out underpay tax illegally they can try to go back twenty years.

In cases where they believe that the failure to pay the right amount of tax is deliberate, HMRC can request records and seek tax for the past 20 years. If you cannot locate the records, HMRC can make estimated assessments for additional tax which may be considerably in excess of the amounts which are likely to be correct.

However, that’s were the expert adviser with experience comes in. We understand that records are not always available and you have no obligation to keep them for 20 years,so we agree with HMRC other ways of reaching an appropriate conclusion on what taxes have been underpaid. It is extremely rare to see a 20 year settlement and early negotiation and co operation with  HMRC through an adviser will ensue the best possible outcome for you

As well enquiries as being time-consuming and can be expensive for you, depending on how far back the HMRC investigate, this can also present many practical, health and family problems for a lot of people. It is therefore important to know how to find solutions with the HMRC to avoid excessive estimated assessments you are unable to pay.


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