HMRC Investigations Insider

I post here about how HMRC enquiries, investigations and disputes actually work, based on experience from both sides of the system. If you’re dealing with something sensitive and don’t want to discuss it publicly, you can make initial contact here: sites.google.com/view/hmrcinves…

It is indeed - lots of people will be receiving correspondence in the coming months and years from HMRC in relation to crpyto. The 20 years limit can apply in two main circumstances: 1. Failure to Notify - Generally if there is a failure to notify chargeability to any tax (i.e. let HMRC know you need to be issued with a return) then the time limit is 20 years. Think someone who has been working cash in hand for years and has never told HMRC they should be filing returns. 2. Deliberate behaviour - This generally means that HMRC are able to demonstrate that the taxpayer knew what they were doing was wrong and that this caused a loss of tax. There is a 20 year time limit across the taxes in this case. Always happy to discuss by DM if you come across something you need a view on.

Thank you, great points. I get a lot of pushback when i post things like this. Totally agree, small problems, grow very fast. And with HMRC announcing a big investment in Crypto work moving forward, a lot of this is very key right now. Yes, I have always said that. Am i correct the 20 years is if a criminal offence (Tax evasion) has occurred?

A client came to me with 28,000+ crypto transactions and a letter from HMRC. He'd been trading across multiple exchanges for years and had never filed a return. Here's what we found 🧵 First job: get everything into one place. Binance, Coinbase. Multiple wallets. Years of history. The Koinly report alone was overwhelming. But buried inside were thousands of transactions his previous accountant had never even looked at. The problem with ignoring crypto tax isn't just the bill. It's the interest. The penalties. And the fact that HMRC now has blockchain analytics tools that can find wallets you forgot you had. Once we reconstructed the full picture, the liability was significant -- but manageable. More importantly, it was accurate. Not a worst-case HMRC estimate. His number, calculated properly, with every allowance and loss accounted for. We submitted a voluntary disclosure, presented the workings clearly, and avoided the higher penalties that come with HMRC finding you first. The lesson: The size of your crypto history doesn't matter. What matters is whether someone has actually looked at it properly. Most people haven't. Most accountants won't. If this sounds familiar, DM me or arrange a chat

Most people dealing with HMRC are not trying to be clever. They are usually trying to work out a number of worrying unknowns in their mind: What have I done wrong? How serious is this? Am I going to prison? (unlikely but a concern I hear a lot) How much is this going to cost? Who can help me with this? In my experience, that uncertainty is what people struggle with most.

There are so many holes in your solution im not really sure where to start. Some general observations though: Your proposals for income tax bands are probably better than we have now. The distortions we have around childcare are causing huge damage to the country. Just make the rates the same for everyone and keep it fair. Wealth taxes have never worked anywhere and never will for pretty obvious reasons. An exit tax would be a disaster. Announce it and people rush for th exit. Bring it in retrospectively and you destroy investor confidence forever - and tax avoidance increases hugely without the corresponding increase in resource to pursue it. Anyone who makes money through uk sourced income is already taxed on it no matter their residence position. If its not uk source we have no claim - and rightly so. International law already obliges people to pay their fair share. There is no need for new rules.

I would add a wealth tax of 1% over 10,000 and 2% over 1,000,000,000 I would also close tax loopholes holes including an exit tax for anyone who leaves the UK and the ability to tax those who continue to make money through the UK even if they have left

I think we should change the tax brackets. Up to 15k tax free Basic rate 20% up to 60k 60k - 80k - 30% 80k - 150k 40% 150k - 500k - 50% 500k - 2,000,000 55% Then 60% on the rest over 2,000,000 What do you think?

One thing I’ve learned doing this work. By the time HMRC open an enquiry, the facts are rarely neat. People have moved on. Records are incomplete. Memory is unreliable. What often happens is that the dispute becomes less about what actually happened, and more about what can still be proved.

6/ In many cases, the underlying issue is actually quite narrow or minor. But the way the enquiry is handled and the way HMRC communicate can make it feel much bigger than it is.

5/ What often happens is that people panic. They assume the worst case scenario and respond too quickly or provide more information than they should.

Why HMRC disputes often feel so unfair 1/ From HMRC’s perspective, a case is a file, a job. From the taxpayer’s perspective, it is usually their business, their finances, and often their peace of mind.

3/ The information balance and demand is uneven. HMRC may start with partial data and jump to a conclusion from it. The taxpayer is then left trying to reconstruct events years later as HMRC claim they have shifted the 'burden of proof' onto the taxpayer

2/ The process is slow. Months pass. Sometimes years. From HMRC’s side, that is normal. From the taxpayer’s side, it feels like everything is on hold.

Chartered Tax Adviser and ex HMRC inspector. Keep your records, documents/ receipts etc. Not only will it help with taxes - but with everything else in life. Warranty claims, faulty goods, insurance claims. The more records you keep and the more comprehensive they are the better. Will save you time and money in the long run.

TELL US: What tips have you picked up from your current or past jobs that would save others money? What specialist insider knowledge do you have that would surprise most people. Please tell us by reply (& say what your job was) & pod producer Simon will collate some to read out.

Chartered Tax Adviser and ex HMRC inspector. Keep your records, documents/ receipts etc. Not only will it help with taxes - but with everything else in life. Warranty claims, faulty goods, insurance claims. The more records you keep and the more comprehensive they are the better. Will save you time and money in the long run.

I’m involved in a case at the moment where the real issue isn’t the law. It’s the evidence. We are years on from the relevant events. Records are incomplete. Old calendars and correspondence are patchy. What looked like a strong case at the start is now much harder to prove than anyone expected. Unfortunately, that is very common.

I had a case where an accountant tried to be “helpful” and gave HMRC far more information than they were entitled to. Records for years that were not in scope. That opened up an entirely new line of enquiry and led to significant assessments and penalties. In theory, being cooperative makes sense. In practice, giving HMRC information they don’t need can be one of the most expensive mistakes in a case.

One thing that often makes HMRC enquiries feel unfair is delay. I had a case where HMRC did not respond for well over a year because the file had supposedly gone to a technical specialist who would not engage with us at all. A complaint was eventually upheld all the way through Tier 2, and compensation was paid. It isn’t the taxpayer’s fault if HMRC choose to run a system without enough resource to progress cases properly.

Courts don’t usually talk in terms of morality, but in tax they do often take a purposive approach and look at what Parliament was trying to achieve. That often just ends up being what the individual judge perceives as a morally correct outcome. It also means outcomes which feel less like strict construction of the legislation and more like a judicial view of what should or shouldn’t work. I’ve seen some egregious avoidance that plainly needed shutting down, but I’ve also seen some very harsh outcomes where the Tribunal seemed uncomfortable with the result the legislation would otherwise produce. I don’t know the facts of Mr Tice’s position. But if he was simply structuring his affairs lawfully, and without contrived or artificial steps, so that the tax due was less than it would otherwise have been, that is not tax avoidance in my view. It is just sensible tax planning. As a reminder, the classic statement in Duke of Westminster still matters: “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be.”

@ExHMRCInspector @Lord_Talbot64 Courts don’t rule on morality do they?

Rayner - accidentally avoided £40k in tax, repaid the money, had to resign. Tice - deliberately avoided £600k in tax, hasn’t repaid anything. 15x the money, infinitely more immoral. He’ll resign as an MP, right? He can just be a shadow MP going forward.

@LeoMontague91 @Lord_Talbot64 There is nothing immoral about structuring your affairs in the legal way that minimising the tax due to the state. The courts have confirmed that to be the case many many times...

@Lord_Talbot64 1) not sure either of us actually know the timing of the payment, but my point is she fessed up and accepted to having to pay it (suspect you knew this was the point). 2) My comment was on the morality of such an arrangement. Again, suspect you knew this. Happy to help.