If someone is believed to be avoiding the payments, accidentally or deliberately. A tax investigation will be launched to recover the money owed. And criminals will be subject to the HMRC tax investigation fine for not following the rules. So now we will talk about how far back HMRC can claim unpaid tax?
Why would HMRC visit me?
Anyone who wins in the UK must pay taxes. If you are an employee your employer will take care of all your payments for you. Withdraw your payment from HMRC and send it directly to the tax collector. However if you earn money outside of regular employment (you can work for yourself. Operate your own business rent a property or make a profit from the sale of assets) you will need to submit a self-assessment.
The deadline for self-assessment online tax filing is January 31. And your form must accurately reflect your earnings for the previous tax year. For example earnings between April 6, 2018 and April 5, 2019 must be reported by January 31, 2020. If HMRC believes there are errors or discrepancies. They may initiate an investigation of your tax return.
What is a tax investigation and for how long can HMRC pay taxes again?
At the beginning of any tax investigation, HMRC will send you a letter informing you that they are investigating your tax filings. They can do this because they have seen an administrative error, looked at some inconsistent figures, or got a quote from an anonymous source who may be paying less. You will be required to submit a series of documents during the investigation, including bank statements, invoices, cost receipts, and third-party quotes, all of which can help HMRC determine if you committed a crime.
So can HMRC investigate closed companies? For historical cases, HMRC has the power to reopen previously settled tax returns if an investigation finds unclear results. In normal cases, the HMRC tax investigation time limit is 4 years, during which they can re-claim taxpayers’ money.
How far can HMRC go back?
After HMRC opened its investigation into its first year of research. They may want to open years earlier.
- If no mistakes have been made and your documents and accounting are in order, you are not allowed to review previous years, although they can still be proven.
- So If a mistake has been made (and you can prove that this is not negligence), it can go back four years
- If the underpayment was made due to your negligence (for example, you did not keep proper records), HMRC can go back six years.
- If HMRC believes that it has deliberately imposed a meager tax, they may try to go back twenty years.
Before you go, I hope this article how far back HMRC can claim unpaid tax is helpful for you.