Machinery in Manufacturing Factory

Case Study: Tax Investigations in the Manufacturing Sector

Assembling a tax enquiry

This engineering company received an enquiry notice from HMRC asking to review the reported number of associated companies and its effect on the corporation tax computations. The initial review revealed that one of the three associated companies had been missed and further tax would be due.

HMRC issued a tax computation based on ‘careless behaviour’ although had not ruled out a penalty based on ‘deliberate behaviour’. This was all done without any discussion.
The advisor explained the causes of the mistake and claimed a ‘reasonable care’ excuse to restrict any further liability to four years instead of six. The Inspector refused to listen and sent a revised computation which was mathematically incorrect. A further letter was sent to the Inspector who forwarded the letter to the Appeals & Review Team who luckily agreed with the client’s advisor.

HMRC finally agreed and reduced the tax settlement required with no penalty. Unfortunately the client still had additional tax to pay but had the best possible result and the professional fees were covered under the Tax Investigations package.

Enquiry at a glance:

  • Investigation lasted 16 months
  • Advisor identified mistakes in HMRC’s calculations
  • Professional fees were in excess of £3,600 to conclude the matter

A shocking result

This electronics company had been struggling for a few years when HMRC launched an enquiry into the business.
The Inspector wanted to review the business accounts and alleged that the director was utilising the business account for personal expenditure. HMRC demanded copious documentation and explanations from the director relating to various purchases and money going into and out of the business.

The advisor representing the client was able to answer all of the Inspector’s questions and prove that the figures were correct.

Thankfully, the professional fees of over £2,100 were reimbursed under the Tax Investigations package – a fact that delighted the business as they had spent the past few years focusing on generating more income and would not have been happy to spend over £2,000 just to prove their innocence!

Enquiry at a glance:


  • Investigation lasted 16 months
  • No amendments were necessary
  • Professional fees of over £2,100 were incurred