Do not give the HMRC a red flag to investigate you – play safe!
It’s absolutely essential to be aware of the common triggers that can prompt an HMRC investigation. These investigations can waste a lot of your time, incur a lot of cost in getting someone to help you, and can also lead to a substantial penalty. So it is very important to know these 5 triggers and make sure you avoid them at all costs.
- Failure to Include Income on Self-Assessment Tax Return
The first thing HMRC looks for is if you have failed to include any sources of income on your tax return. This could include rental properties, foreign income, foreign gains, crypto gains and more.
- Undeclared Bank Accounts and Investments
HMRC has access to vast amounts of information and can easily cross-check if you have undeclared bank accounts, even if they only have small amounts of interest. The same goes for foreign accounts and investment portfolios.
- Overstated Expenses for Self-Employed or Property Business
If you’re self-employed or have a property business, HMRC can compare the expenses you’ve claimed in one year against other years. If there’s a significant difference or a loss, this could trigger an investigation.
- Incorrect Claims for Business Asset Disposal Relief
Claiming business asset disposal relief in the wrong way, such as not including the necessary notes or ticking the right boxes, can also prompt an investigation.
- Late Tax Returns or Reclaiming Refunds
Finally, if your tax returns are late or you’re reclaiming a refund, this can open up an investigation. HMRC typically starts with one area and uses that as a basis to examine the rest of the year.
In conclusion, it’s crucial to stay on top of your tax affairs and have a good accountant helping you. Please follow and like this video to get my latest tax tips, and get in touch with me via the website in my profile if you have any questions
Have you ever received a nudge letter or investigation from the HMRC? How did you handle it? Please share your experience in the comments!