The Challenge: An HMRC Investigation Triggered by Incorrect Tax Returns
When a new client (and genuinely decent human) came to us for HMRC tax investigation support, he was understandably stressed. His previous accountant had submitted inaccurate tax returns over a three-year period. Specifically, the figures included grossly overstated expenses and tax refunds the client was never entitled to receive.
As a result, HMRC flagged the inconsistencies and launched an investigation, requesting that all three years of tax returns be reviewed. Unsurprisingly, this put the client under significant pressure, both financially and emotionally.
The Financial Impact: A Significant Tax Bill — and a Bigger Risk
Once HMRC completed its review, the numbers were eye-watering. The client owed:
-
£11,916 in unpaid tax
-
£1,417 in interest
Importantly, HMRC treats interest as commercial restitution. In other words, the payment is non-negotiable because the money should have been sitting in HMRC’s bank account in the first place.
However, while the tax and interest had to be paid, the story didn’t end there.
The Real Risk: HMRC Penalties of Up to 100%
What was negotiable was whether HMRC would impose penalties on top of the tax owed. These penalties depend on behaviour and can range from 0% to 100% of the lost revenue, depending on whether HMRC views the errors as:
-
Careless
-
Deliberate
-
Deliberate and concealed
In this case, penalties alone could have added another £11,916 to the bill.
Our Approach: Clear Communication and Strategic Representation
This is where our expertise really mattered. We worked closely with the client to fully understand the circumstances behind the incorrect filings. Then, crucially, we presented this context clearly and professionally to the HMRC investigator.
By proactively engaging with HMRC, explaining the client’s reliance on poor professional advice, and demonstrating a cooperative and transparent approach, we ensured the full picture was taken into account.
The Outcome: Zero Penalties and a Huge Saving
Thanks to those discussions, HMRC agreed not to apply any penalties at all.
That decision saved the client up to £11,916 on top of his tax bill. Most importantly, it brought the investigation to a close and gave him peace of mind. Needless to say, he was extremely relieved 😊
How Our HMRC Tax Investigation Support Can Help You
If you’re facing an HMRC enquiry, discovery assessment, or full tax investigation, early support makes a real difference. With the right representation, you can reduce stress, protect your position, and in many cases, minimise or eliminate penalties.
👉 If you’re worried about an HMRC investigation or historic tax returns, get in touch today. We’ll deal directly with HMRC, explain your options clearly, and help you reach the best possible outcome—without the sleepless nights.