9 Stages of TAX Investigation in the UK
1. Risk Assessment & Selection
• HMRC regularly reviews tax returns and financial data.
• If discrepancies or unusual activity are detected, a taxpayer may be flagged for investigation.
2. Receiving the HMRC Notification Letter
If selected for investigation, HMRC will send a letter that includes:
• The type of investigation (Aspect, Full, or Random Check).
• A list of required documents.
• A deadline for response.
3. Gathering & Submitting Documents
HMRC will request financial records such as:
• Bank and credit card statements
• VAT returns and payroll records
• Contracts, invoices, and receipts
4. Attending an HMRC Interview
In some cases, HMRC may request an interview to clarify details about your finances.
Your Rights During an HMRC Interview:
• You can bring an accountant or legal representative.
• You can request a transcript of the discussion.
• You don’t have to answer immediately—you can ask for time to provide accurate information.
5. HMRC’s Internal Review
• HMRC will analyse the submitted documents.
• They may cross-check with external sources such as:
1. Your personal and business bank accounts
2. Third-party records from suppliers, clients, or financial institutions
3. Your online activity (including social media posts)
6. Identifying Discrepancies
If HMRC finds inconsistencies, they will issue a report outlining their concerns.
Common Issues Found:
1. Underreported income (earnings not declared in tax returns).
2. Overclaimed expenses (deductions not supported by records).
3. VAT miscalculations or payroll tax errors.
7. Negotiation & Penalties
If HMRC determines that additional tax is owed, they will outline:
• The amount of unpaid tax.
• Any penalties or interest charges.
Options to resolve the case, such as:
1. Provide additional documents to dispute the findings.
2. Negotiating a settlement.
3. Paying the outstanding tax to avoid further legal action.
8. Legal Appeals & Further Action
If you disagree with HMRC’s findings, you have the right to appeal.
• Appeals can be handled through internal reviews or escalated to a tax tribunal or court.
9. Final Resolution & Compliance Measures
Once the investigation is closed, HMRC may recommend steps to prevent future issues, such as:
• Improved record-keeping systems.
• Regular accountant reviews.
• Stricter financial policies for tax compliance.
Facing a tax investigation in the UK in 2025? HMRC’s process can be complex, but knowing the nine key stages helps. Whether you’re based in Camden, Brixton, West End, Hemel Hempstead, Mayfair, or beyond, a good accountant can guide you, keep records in check, and reduce penalties. If you’re under investigation or want to stay compliant, expert advice can make all the difference.