Tax Audit

Tax authorities cannot check every return in detail, so they select some for audit. Selection may be random, based on computer analysis that flags unusual figures, triggered by information from third parties such as employers or banks, or focused on particular industries or types of claim.

Audits range from simple correspondence asking for documents to support a specific item, to full examinations of a business's books carried out at its premises.

For example, a self-employed person who claims unusually high travel expenses compared with similar businesses might receive a letter asking for receipts and records to support the claim. If they cannot provide evidence, the expense may be disallowed, and they may owe extra tax, interest and possibly a penalty.

Most audits are not accusations of fraud; they are checks. Good record-keeping is the best protection. Tax authorities usually have a set number of years in which they can reopen a return, which is often longer where there has been careless or deliberate error. Taxpayers generally have the right to appeal the outcome.