How long does an HMRC tax investigation last?

April 27, 2023

What is the duration of HMRC's tax investigation?

A recent case heard by the First-tier Tribunal (FTT) involved taxpayers seeking to end a lengthy HMRC investigation into their tax returns. While the case involved complex tax issues, the question remained as to whether HMRC had free reign to continue the investigation indefinitely.

Tax Enquiries

HMRC had been investigating the self-assessment tax returns of Jonathan, Jeremy, and the executors of Stephen Hitchins (H) for over eight years. H belonged to a wealthy family with overseas business interests, and HMRC was investigating concerns related to the transfer of assets abroad (ToAA) rules. These rules exist to prevent income and gains from such assets from escaping the UK tax net. Given the amounts involved, the tax loss could have been substantial.

Closure Application

H answered all of HMRC's reasonable questions, and both parties reached an impasse. HMRC was unable to prove that there was unfair tax avoidance, while H was unable to persuade it that there was no avoidance. To resolve the stalemate, H applied to the FTT for closure notices that would force HMRC to stop its investigations.

Tip. If you reach a stalemate in an HMRC enquiry, you can apply to the FTT to close it formally. The FTT will want to see that you have provided all the information and data that HMRC could reasonably expect to settle the enquiry.

FTT's considerations

HMRC argued that, despite several years of investigation, it did not have all the information necessary to determine if the ToAA rules applied. While the FTT acknowledged that not all of H's responses were complete, it was apparent to the FTT that HMRC had misunderstood the situation. More concerning was the tax inspector's unwillingness to admit any mistakes or errors and to stick to his original view, even in the face of new information provided during the investigation. Unfortunately, this approach is not uncommon with many HMRC officers.

FTT's decision

The judge concluded that HMRC's investigation had gone on for too long and that HMRC was unable to demonstrate that it had reasonable grounds to deny H's request for closure. As a result, the FTT ruled in H's favour, giving HMRC six weeks to issue closure notices.

Settling an Enquiry

While the investigation, in this case, lasted for several years, it is not necessary to wait that long to ask the FTT to order HMRC to close an enquiry. The reason for the lengthy delay, in this case, was due to the complex facts and legislation involved. If there is a simple situation with no dispute about how the rules work, HMRC should close the enquiry without undue delay, which could be a matter of months. It should not keep an enquiry open while it fishes for more information to expand its investigation.

Tip. Before resorting to the FTT to close an enquiry, consider using one of the less confrontational dispute resolution options, such as alternative dispute resolution (see The next step).

As long as you answer HMRC's questions and provide the information it is entitled to, it should not keep the enquiry open to seeking other means of expanding its investigation. This was the case in this instance, and the FTT ordered HMRC to close its investigation.

Elena Meskhi & Co’s Tax Investigation Support

Our team at Elena Meskhi & Co have been providing tax investigation support with a 95% success rate over the last 15 years. This means that if you are facing a tax investigation, we will handle it from start to finish, communicate with HMRC, provide the required documents, apply for the needed extensions, and much more. We also offer tax investigation insurance to ensure that you are represented by professionals during a tax investigation. 

Book a discovery call to discuss an ongoing tax investigation. 

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