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How to stop HMRC from opening an investigation
The honest answer is you cannot, though you can be aware of risk areas that HMRC may target and act accordingly to reduce the risk of enquiry.
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A very small number of the Self-assessment (SA) population are selected randomly: no one can prevent that, see HMRC internal guidance is at EM0093.
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Business ratios are compared in similar type business, if your results are out of line with the normal for that industry, you are at risk: Consider how your results compare to others and be aware of where you sit and why.
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Unusually high and one-off deductions for expenses are similarly at risk: Claim only what you are entitled to and can provide with documentary evidence.
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If your business accounts and tax returns does not provide you with the apparent means to live, then you may be targeted: Declare all your income and provide additional notes on your tax return to minimise scope for incorrect assumptions.
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Be aware: HMRC gather data from many sources including UK and overseas banks, local authorities, online platforms e.g. Airbnb and eBay. If you fail to notify or understate any source, you are at risk.If you are identified by HMRC and you either don’t complete a tax return or the information held contradicts your tax return you may be the subject of an investigation by HMRC: Be aware what legal obligations you have to register for SA, see Check if you need to send a Self-Assessment tax return.
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Do not participate in avoidance schemes: They are targeted by HMRC and if you are told of a great way to save tax and are paying someone for access to their scheme it is almost a certainty it does not work. In addition to paying the scheme fees you may at some point be faced with a retrospective tax bill including , interest and possibly penalties.
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