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HMRC tax investigation

HMRC Legal Powers

HMRC tax investigationMany people remain unaware that in an age where data protection and privacy are big issues, such rights do not always exist when it comes to tax affairs.

In this area, HMRC has very wide powers to conduct surveillance and intrusively snoop on suspected tax dodgers.

Most would agree that tax evasion is a very serious issue, which should be investigated by HMRC if there’s a suspicion of fraud and criminal activity. But not everyone agrees when HMRC uses its power to collect more tax from innocent workers in order to minimise its tax gap, raising concerns on privacy infringement.

The power of HMRC comes from Schedule 36 of the Finance Act 2008, which allows HMRC to obtain information and documents from taxpayers and gives them the power to inspect businesses. According to HMRC, their criminal investigation powers allow them to:

  • Apply for orders requiring information to be produced
  • Apply for search warrants
  • Make arrests
  • Search suspects and premises following arrest

In July 2018, HMRC published a consultation proposing reforms to the existing legislation. Among other suggestions, they proposed to remove tribunal approval for third-party notices and create separate rules for third-party information requests.

While HMRC claims the reforms are meant to cut costs and improve efficiency, many businesses and taxpayers are concerned that this may remove some of the necessary checks and balances in place, which are particularly important when the requests relate to banking information.

How far can HMRC go in investigating?

While future changes are yet to be determined, at present, HMRC has the following powers to catch tax dodgers:

Their powers include:

  • The ability to track a suspected tax evader’s web browsing.
  • The ability to intercept and read private emails or eavesdrop on telephone calls, only permitted with a warrant.
  • The potential to bug an office, house or car.
  • The power to access credit reference information in order to compare alleged levels of income, information and documents given to credit companies and spending habits which may not match the information given in tax returns.
  • The right to visit third parties.
  • The ability to pass on any other relevant information regarding tax issues to other arms of the organisation.

What HMRC are not authorised to do

Be aware of your rights:

  • HMRC cannot force entry or physically search by hand, they can only inspect by eye.
  • They cannot make an unannounced visit without it being authorised by a senior officer.
  • They cannot visit domestic premises.
  • They cannot compel a taxpayer to answer questions.
  • They must make it clear why a taxpayer is being investigated. They cannot investigate any other matter that they haven’t provided notice about.

While HMRC officers have clear restrictions under Schedule 36, it has also been disputed that these officers can take advantage if a taxpayer voluntarily waives their rights.

Tax investigations

If you’re being investigated by HMRC, contact our experienced team of accountants and tax advisors today. Our tax investigations services include:

  • Liaising with the local tax office
  • Compliance reviews of PAYE and NI
  • Investigations of VAT issues

Get in touch today on 020 8108 0090 or contact us via our Online Form to arrange a complimentary, no obligation meeting.

This post was first published on 10 02 2013 and updated on 06 02 2019.

This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.

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