Facing HMRC: Why our tax investigation service is more important than ever

The Tax Investigation Service we offer continues to be a crucial safeguard for our clients, protecting them from the often substantial professional fees incurred during a tax enquiry or compliance check from HM Revenue & Customs (HMRC).

We strongly recommend this service to all our clients. Last year, we enhanced our offering by partnering with a new provider, enabling us to offer an even more comprehensive insurance policy. This upgraded policy covers a broader range of HMRC challenges and provides higher limits on professional fee cover, offering greater peace of mind in an increasingly unpredictable compliance environment.

The rising tide of HMRC enquiries

The risk of an HMRC enquiry has never been higher. Enquiries may be triggered randomly or arise from targeted risk factors so even those who maintain meticulous records are not immune.

In recent years, HMRC’s focus has shifted back to enforcement and compliance, following a period of reallocation during Covid-19 and Brexit.  At the same time, a period of high inflation and economic pressures have heightened the government’s reliance on tax revenue. As a result, businesses and individuals alike are more likely than ever to come under HMRC’s scrutiny.

A system under strain

While HMRC is stepping up its enforcement efforts, many of its systems and processes remain under significant strain. Staff shortages and administrative delays often mean that investigations are slow-moving and poorly managed, creating unnecessary stress, time loss, and additional cost for taxpayers. Even when enquiries result in no further tax liability, the professional fees involved can be considerable.

Our Tax Investigation Service protects clients from these costs, offering up to £100,000 of professional fee cover from as little as £144 per year.

Nudge letters – a modern tactic

HMRC’s increasingly data-driven approach includes widespread use of ‘nudge letters’ – communications designed to prompt taxpayers to review or amend their returns based on data discrepancies HMRC believes exist. These letters are not formal enquiries, but they do demand a careful and well-considered response.

Since 2020, HMRC has used nudge letters to address a wide range of tax areas, including income from holiday lets, disposal of business assets, overseas interests, digital marketplaces and social media. With the rapid expansion of HMRC’s digital capabilities, we expect these letters to become even more prevalent in 2025/26. 

Our improved Tax Investigation Service provides full support for responding to all HMRC investigations including nudge letters. We review the position thoroughly, manage the response, and ensure our clients engage with HMRC from a position of strength.

Peace of mind in uncertain times 

In 2025, having a robust defence strategy against HMRC enquiries is not just advisable, it’s essential. Our Tax Investigation Service offers comprehensive protection and practical peace of mind, allowing you to focus on running your business or managing your personal affairs with confidence.

If you would like a quote or more information about the service, please speak with your usual Kreston Reeves contact, email taxdisputes@krestonreeves.com, or visit our dedicated Tax investigation service page.