HMRC Investigations Insider

Former HMRC Inspector of Taxes
Ex-Head of Tax Disputes (Top-10 firm)
I explain how HMRC tax investigations really work - and how to deal with them properly!

[HMRC Investigations Insider @ExHMRCInspector]

I post here about how HMRC enquiries, investigations and disputes actually work, based on experience from both sides of the system.

If you’re dealing with something sensitive and don’t want to discuss it publicly, you can make initial contact here: https://t.co/NDt7P6Tk7j

[HMRC Investigations Insider @ExHMRCInspector]

@BitcoinTaxUK Thats a good point - and one people often miss.

The burden for HMRC shifting the onus onto you to disprove something , or prove a negative, is actually suprisingly low...

[HMRC Investigations Insider @ExHMRCInspector]

I have seen cases where the taxpayer’s biggest mistake was not the original tax issue.

It was trusting the process too much.

They assumed HMRC would only ask for what they needed.

They assumed silence meant progress.

They assumed delay meant the issue was going away.

They assumed being helpful would be rewarded.

Unfortunately, those assumptions can be expensive.

[HMRC Investigations Insider @ExHMRCInspector]

@DavidBell321 @CutMyTaxUK We have actually relocated several people to France. It's not always tax driven. Many are leaving due to the lack of ambition or direction shown in the UK and feel, rightly or wrongly, we are in increasingly fast decline.

[HMRC Investigations Insider @ExHMRCInspector]

A common mistake when dealing with HMRC is assuming cooperation means giving them everything they ask for.

It does not.

You can cooperate fully while still questioning scope, relevance and legal entitlement.

In fact, that is often the safest approach.

The aim is not to obstruct.

The aim is to avoid turning a narrow enquiry into a wide one because nobody stopped to ask whether the request was valid.

[HMRC Investigations Insider @ExHMRCInspector]

Most people think the hard part of a tax dispute is the legislation.

Sometimes it is.

But more often, the hard part is proving ordinary things years later.

Why someone travelled.
Who made a decision.
What advice was given.
What a payment was for.
Why a document says what it says.

At the time, none of it felt important.

Years later, it can become the entire dispute.

[HMRC Investigations Insider @ExHMRCInspector]

One thing I saw inside HMRC that still matters now.

A case can become “high risk” very quickly.

Not always because the facts justify it, but because the first response creates more questions than it answers. Or because information is provided that shouldnt have been.

Long explanations. Extra documents. Inconsistencies. Gaps. Assumptions.

Once that risk view forms internally, it can be difficult to shift.

That is why the first response to HMRC should never be treated flippantly - and it is generally better to get professional support.

[HMRC Investigations Insider @ExHMRCInspector]

Hi Cato

Honestly not as many as we used to see when things were done manually - however you do still get them occassionally.

Whether or not s114 applies is going to be fact dependent but HMRC will usually argue for it regardless.

The important point is that any error must be a "defect of form, not substance". Therefore, things like misspelling of names/addresses or even the wrong number typed in for the amount of the assessment would likely be 'saved' under s114.

Getting the year of assessment wrong entirely would not be 'saved'.

The courts have tended to interpret s114 quite favourably in HMRC's favour historically however....

[HMRC Investigations Insider @ExHMRCInspector]

A lot of HMRC disputes begin with a simple problem.

HMRC think they have spotted a pattern. The taxpayer thinks they are being accused.

Those are not the same thing.

But once the letter lands, the fear is real. People start imagining penalties, prosecution, bankruptcy, reputational damage.

Often the first job is not technical at all.

It is calming the situation down enough to work out what HMRC actually have, what they think it means, and whether they are right.

[HMRC Investigations Insider @ExHMRCInspector]

@DanNeidle I agree. No story here.

[HMRC Investigations Insider @ExHMRCInspector]

I’ve always found the Loan Charge to be a difficult area.

There were clearly arrangements that needed addressing. But the way it was introduced and handled has, in many cases, created long-running uncertainty and some very harsh outcomes.

The current settlement process feels like it risks repeating some of those issues. There is still a lack of clarity on how the review will be implemented in practice, and that leaves people in a difficult position.

What I am seeing is that while the Loan Charge position itself remains in flux, HMRC are in some cases willing to engage on settlements outside of that framework on more pragmatic terms.

In my experience, these situations tend to turn on detail and timing rather than headlines.

If you’re currently dealing with this and weighing up options, I’m happy to have a discussion.

[HMRC Investigations Insider @ExHMRCInspector]

One thing I’ve learned doing this work.

You can have a perfectly reasonable position.

But if, years later, you can’t quite prove how things actually happened, it becomes much harder to defend.

The facts are important - but, in practice, it’s the evidence that wins.

[HMRC Investigations Insider @ExHMRCInspector]

Most HMRC disputes don’t become difficult because of the tax.

They become difficult because of what happens afterwards.

Delay.
Missing records.
Faded memories.
People no longer involved.

By the time anyone sits down to deal with it properly, just establishing facts can prove almost impossible.

[HMRC Investigations Insider @ExHMRCInspector]

One of the more uncomfortable realities in HMRC disputes.

You can be entirely honest - and still lose.

Not because the law is against you, but because years later you can’t quite evidence what actually happened.

I’m seeing this in a case now. What felt like a strong position at the outset is much harder to prove than anyone expected.

In theory, the facts matter. In practice, it’s the evidence that wins.

[HMRC Investigations Insider @ExHMRCInspector]

One thing that often surprises people.

The person you’re dealing with at HMRC is often not the person actually deciding the case. Quite often they are not even tax trained and work from a pre-designed set of instructions (SOP's and SWI's).

[Bonus point if you can guess what the acronym's are!!]

It's why things can feel robotic and scripted on the phone - because sometimes they are literally reading from a flowchart or list.

The real decision's are made in the background by technical specialists, governance boards and policy teams.

That’s why things can feel slow. There are not enough tax trained specialists in HMRC and that creates resource crunch points jamming up the whole system.

[HMRC Investigations Insider @ExHMRCInspector]

It's an interesting one as you would need to be able to show ( I would guess) that the provision of records directly led to a financial loss. It may be difficult for you to prove that - as the financial loss is actually because your tax return was wrong.

However, if the underlying figures in the historic return were prepared by the hypothetical accountant then you have stronger groundsfor a claim as they got it wrong in the first place. Hope that makes sense!

I should probably caveat that I am not a lawyer, nor am I an insurance claim specialist so I am just speculating here =].

[HMRC Investigations Insider @ExHMRCInspector]

I have a case where an accountant gave HMRC records they weren’t entitled to see.

Years that weren’t properly in scope.

That opened up a new enquiry.

Which may lead to assessments and penalties that would never have arisen otherwise.

Trying to be helpful can be very expensive.

[HMRC Investigations Insider @ExHMRCInspector]

@CutMyTaxUK I had a COP9 (tax fraud) case one centered around landfill tax avoidance. The difference between disposing of inert waste and other waste is phenomenal - the landfill tax avoided was in the millions.... A clear financial incentive to avoid it if ever there was one.

[HMRC Investigations Insider @ExHMRCInspector]

@Heccles94 In my experience of working at HMRC and in disputes - HMRC take a far far closer look at the financial position of those you would class as "rich" than they do the average working class person. For obvious reasons....

[HMRC Investigations Insider @ExHMRCInspector]

@nw_nicholas I'm here when you need me... 😇