Revenue and Customs' extensive powers allow it to enquire into tax returns, undertake wider tax investigations, compel disclosure of documents or information, carry out VAT, PAYE and NICs inspections on company premises and raid premises to make arrests and seize material for prosecutions.

The Revenue targets for investigation companies it assesses as a high risk (such as companies with a low effective tax rate, or those involved in perceived tax avoidance or cross-border transfer pricing). The taxman deals with most suspected tax frauds under its Civil Investigation of Fraud procedure, which requires companies to cooperate fully and pay all taxes due, plus penalties and interest.

A few cases are selected for prosecution when the Revenue wants to send a strong deterrent message, for instance where it believes there is concealment, deception or corruption, and unresolved disputes may be referred to appeal tribunals. The Revenue and other regulators (both in the UK and overseas) may share confidential information relating to a company.

Targeted companies may suffer reputational damage, disruptive investigations, litigation, prosecution and penalties. Companies can minimise these risks by maintaining good relationships with the Revenue, having effective document retention policies, limiting “high risk” tax activity and, if subjected to an investigation, early voluntary cooperation.

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