An Accountant’s Guide To Surviving A Tax Investigation

Anyone whose financial dealings come under a tax inspector’s scrutiny needs to prepare for an emotional challenge. Denial and terror are the usual reactions followed by regret and anger.

Daniel Dover, a partner at BDO as well as a co-author of “HMRC – Her Majesty’s Roller Coaster: Hints on How to Survive a Tax Investigation,” shares his guide for surviving a tax investigation.

To stay calm

Tax is very complicated. It is important to stay calm and to find help from an expert and experienced adviser who knows how to resolve investigations and has information on how an auditor operates.

To not destroy any evidence

HMRC will assume that a person is hiding something when an evidence is destroyed. One should be prepared to secure some replacements. Then, he or she needs to work with his or her adviser to fill the gaps and do reasonable estimates.

To seek clarification

It is best to keep asking when there are certain points not understood. HMRC urges the tax inspectors to work together with the parties involved.

To not under-deliver and not over-promise

When it is impossible to meet a set deadline, it is helpful to talk to the Revenue, to describe the situation and to agree on a new time scale. When deadlines are missed, it increases penalties and results to formal information demands. When payments are needed, the tax man should be informed right away as missing the pre-agreed payments results in serious consequences.

To not assume

The Revenue has access to big amounts of data and will be able to get more. If there is an error in a return, do not assume that is all they are interested in as they will also want to check the other years.

To be honest

Full disclosure of all needed facts and an explanation on things going wrong is essential.

To be a step ahead

Each draft response should be read carefully. Answer a question and give supporting documents during a response.

Conclusion

Tax laws and legislations are complex matters that require knowledge and skills to understand. It is helpful for an average taxpayer to talk to audit insurance brokers in order to equip himself or herself with insurance especially when audit cases need to be defended. An insurance will cover those costs risks.

 

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