Why Investigations Start
Local District
The Inland Revenue does not need to have any reason for opening an enquiry. Some Local District enquiries are opened at random as part of the Inland Revenue’s way of checking a proportion of the self assessment returns which are submitted.
Other returns are pre-selected for enquiry because of a suspicion that a tax return contains errors. The taxpayer may not discover the reason for the enquiry, but whatever the situation, it is likely to be stressful, time consuming and expensive.
Serious Civil Investigation Office / CIF
SCI and CIF Tax investigations are not common, but when they do occur, they are serious. Generally there are only a few hundred cases a year.
The officers from SCI and CIF are some of the most experienced investigators in the Inland Revenue. They also have a full range of statutory powers to obtain documents, carry out dawn raids and initiate criminal prosecutions.
If a letter or communication is received from the SCI or CIF, it is essential that it is handled immediately by someone who has expertise and experience in this area.
Local Investigations
Unusually high business expenses, for instance legal or travel costs
Disparity between profitability of similar firms in sector/area
Sending in Tax Returns or accounts late
PAYE Irregularities
Excessive use of consultants
Large petty cash accounts
Vs
SCI/CIF Investigations
Complicated group structures often involving offshore income or assets held in trusts and overseas banks
Unexplained increases in income, cash, bank transfers
Other suspicions of Serious Fraud such as false invoicing
Duties (tax, interest and penalties) of at least £100,000 outstanding