There are few things that can make a business owner’s heart sink faster than a brown envelope landing on the doormat with an HMRC logo on it. The formal language, the request for information, the very mention of an "enquiry" or "investigation"—it’s enough to cause sleepless nights.

If you’ve received one of these letters, your first reaction might be panic. You start wondering, "What have I done wrong?"

So let's start with the most important piece of advice: take a deep breath. An HMRC enquiry does not automatically mean you’re in trouble. It’s simply a process to ensure the right amount of tax has been paid.

At Curve Accountancy, we’ve supported many business owners in Crawley and across West Sussex through this exact process. This guide is here to give you a calm, plain English roadmap of what to expect, what to do, and how to prepare.

Why Have I Been Chosen? Common Triggers for an Investigation

HMRC doesn't usually disclose the exact reason for an enquiry, but there are several common triggers that can put a business on their radar. Understanding these can help you minimise your risk in the future.

• Consistently Filing Late: Late submission of tax returns or accounts is a major red flag for HMRC.
• Large, Unexplained Fluctuations: If your turnover suddenly drops while your expenses remain high, or your profits spike dramatically, it can trigger a closer look.
• Figures That Don't Match Industry Averages: HMRC has a wealth of data. If the profit margins or expenses you’re declaring are significantly different from the average for a business of your type and size in your area, it might raise questions.
• Errors or Omissions: Simple mistakes on a tax return can sometimes lead to a more formal enquiry.
• A Tip-Off to HMRC: It’s an unfortunate reality that HMRC sometimes acts on information provided by third parties.
• Purely Random Selection: Sometimes, it’s just the luck of the draw. HMRC conducts a certain number of random checks each year to ensure overall compliance.

The Different Types of HMRC Enquiry

The term "investigation" can sound dramatic, but most enquiries are routine checks. They generally fall into one of three categories:

Full Enquiry

This is the most comprehensive type of check. HMRC will conduct a full review of your entire tax return and the underlying business records. This is less common and is usually reserved for cases where they suspect significant errors.

Aspect Enquiry

This is far more common. An aspect enquiry focuses on a specific part of your tax return that HMRC wants to look at more closely. For example, they might just want to query a large expense claim or your vehicle mileage records.

Random Enquiry

As mentioned, some businesses are simply selected at random as part of HMRC's standard compliance work. In these cases, there is no specific reason to believe anything is wrong.

You've Received a Letter. What to Do Next (And What Not to Do)

How you respond in the first 48 hours is crucial. Following a clear process will reduce stress and lead to a better outcome.

1. Don't Panic Read the letter calmly. It does not mean your business is failing or that you are accused of wrongdoing. It is a request for information.

2. Don't Ignore It This is the single worst thing you can do. Ignoring correspondence from HMRC will not make the problem go away; it will only escalate the situation and could lead to automatic penalties.

3. Check the Deadlines The letter will state a clear deadline by which you need to respond or provide the requested information. Make a note of this immediately.

4. Don't Contact HMRC Directly (Yet) Your natural instinct might be to pick up the phone and try to "sort it out." We strongly advise against this. You may not fully understand the technicalities of what they are asking for and could inadvertently say something that complicates the situation.

5. Call Your Accountant Immediately This is the most important step. Your accountant is your professional representative. They understand the process, speak HMRC's language, and can act as a calm and professional buffer between you and the tax inspector.

How a Good Accountant is Your Best Defence

Once you engage an accountant, they will take control of the process, removing the stress and emotion from your shoulders.

• They Act as Your Intermediary: Your accountant will handle all correspondence and communication with HMRC. The inspector will call them, not you. This alone provides immense peace of mind.
• They Speak the Language: Tax inspectors use technical language and refer to specific legislation. Your accountant is fluent in this language and can ensure there are no misunderstandings.
• They Prepare the Information: Your accountant will review HMRC’s request and work with you to gather and prepare the exact records and documentation needed. They will present it in a professional format that makes it easy for the inspector to review.
• They Can Negotiate: If it turns out an honest mistake has been made, your accountant can help explain the situation and negotiate any potential penalties, often helping to reduce them.

Having an experienced professional in your corner transforms the process from a personal ordeal into a manageable business task.

Preparing for the Future

The best way to handle an investigation is to be prepared before you ever receive a letter. This means keeping meticulous, organised, and accurate records. Using cloud accounting software like Xero or QuickBooks is no longer a "nice-to-have"; it's an essential part of running a compliant modern business.

An HMRC investigation is a serious process, but it doesn’t have to be a catastrophe. With calm, professional support, it can be navigated efficiently and resolved.

If you’ve received a letter from HMRC or are worried about your tax compliance, don’t face it alone. 

Get in touch with us today.