What happens during an unannounced investigation of the ministry of taxation

1)      Why HMRC investigates businesses:

Under HMRC regulations, they are required to routinely inspect the operations of businesses for the following reasons:

a)      They suspect that their salon employs people illegally

b)      The income of the salon is not declared at all.

c)      Tips for employees whether they pay taxes or not

d)      When hiring employees, does the employer see and check the necessary documents in accordance with the law?

e)      The employer does not pay the minimum wage in accordance with the minimum wage prescribed by law

f)       Are the working hours of the salon and employees commensurate?

g)      Does the salon owner have other personal income?

h)      Does the income of the salon exceed VAT?

i)       Does the employer provide benefits to employees?

j)       Does the owner use the company's credit card?

k)      Who is the person who is in charge of the contract for the salon, is that person related to the salon owner or not?

l)       Is there insurance for employees and customers in the salon?

m)   Is the money put in the bank valid or not?

2)      The Ministry of Taxation's inspection method:

HMRC usually gives advance notice by mail but they also reserve the right to inspect the salon without prior notice at any time. When they arrive at the salon, they will present their ID card and an HMRC authorization letter authorising them to check. Therefore, it is best to cooperate with them when they come to investigate to avoid unnecessary fines.

If you resist letting them investigate, they can ask the court for permission to issue a fine of £300 and £60 per day as uncooperation will delay their investigation.

3)      How HMRC will investigate:

HMRC will send two inspectors to the salon at the same time for an initial inspection. They will interview how you run the business, how you hire employees and manage money, do you understand English law, etc. v..

It is very important that when they arrive, an accountant is present to assist you in answering.

After they leave, they can come back a second time to get more information or invite you to the office to assist in the investigation, so you have to write down the testimony for them to answer correctly. After they investigate all the documents they provide, they will make a decision on whether to fine you or not, and how much.

4)      How long will the investigation take:

On average, investigations can last four to six months but can last longer depending on the complexity of each case.

5)      Fine level:

The penalty regime will apply depending on each violation:

a)      Failure to file a tax return:

0% to 30% of the tax amount that needs to be paid into interest

b)      Guilty but not deliberately concealed when HMRC investigated

20% to 70% of the tax amount that needs to be paid to the interest rate

c)      Intentional concealment

30% to 100% of the tax amount that needs to be paid in public interest rate

Note: normally HMRC will investigate 6 years of business records, but if the case is complicated, they can re-investigate the previous 20 years of business records