Financial Due Diligence in the Spotlight: Minimising Tax Risks Before an HMRC Review

As regulatory scrutiny intensifies and HMRC increases its focus on compliance, UK businesses must elevate their standards of financial due diligence. Whether preparing for an acquisition, securing investment, or simply safeguarding costly tax investigations, robust due diligence is no longer optional—it is essential. For organisations across Greater Manchester, Cheshire, Merseyside, Lancashire, and Cumbria, Cogency Corporate Finance offers expert guidance designed to anticipate risks and ensure full financial transparency.

Financial due diligence (FDD) refers to the comprehensive review and analysis of a business’s financial performance, risks, and obligations. It helps stakeholders understand the viability, sustainability, and integrity of an organisation’s financial position. This process is critical for:

• Investors seeking to verify the health of an acquisition target
• Business owners planning a sale or restructuring
• Companies looking to raise capital or enter joint ventures
• Enterprises preparing for HMRC tax investigations or compliance audits

As highlighted in recent HMRC guidance on compliance checks, tax authorities are empowered to examine a business’s financial records, transactions, and tax filings. The consequences of inaccuracies or omissions can be severe—from penalties and interest charges to reputational damage and legal disputes.

There has been a noticeable rise in tax investigations, partly driven by HMRC’s push to close the tax gap and increase revenue collection. According to HMRC’s Measuring Tax Gaps report, small businesses, in particular, account for a substantial proportion of the UK’s tax gap—making them a key target for compliance checks.

Additionally, HMRC now employs advanced data analytics to identify discrepancies and flag potentially non-compliant entities. This means even unintentional errors or legacy issues may trigger a review, making proactive due diligence essential for every business.

At Cogency Corporate Finance, we deliver a tailored due diligence service that goes beyond standard checklist reviews. Our approach is strategic, comprehensive, and aligned with your business objectives.

Key elements of our FDD service include:

• Tax Risk Assessment: Identifying exposure to direct and indirect tax liabilities, including Corporation Tax, VAT, PAYE, and Capital Gains Tax.
• Financial Record Analysis: Scrutinising historical financial statements, management accounts, and internal controls to ensure accuracy and completeness.
• Compliance Review: Evaluating adherence to statutory and regulatory obligations under HMRC, Companies House, and relevant industry bodies.
• Commercial Review: Examining contracts, revenue models, and customer/supplier dependencies to assess financial sustainability.
• Forecast and Cash Flow Verification: Stress-testing financial projections and working capital requirements against various risk scenarios.

Our team also ensures alignment with industry-specific standards and regulations, offering specialised insight into sectors such as I.T, Transport, Facilities Management, Manufacturing, Wholesale Distribution, Engineering, Retail, Personnel and professional services.

Learn more about our Specialist Finance services tailored to high-risk and high-growth scenarios.

If your business is selected for a compliance check, preparation can significantly influence the outcome. Cogency CF advises businesses to adopt the following best practices:

1. Maintain Accurate and Timely Records
   Ensure that all financial data—transactions, payroll, invoices, and tax filings—are accurate and up to date.
2. Conduct Periodic Internal Reviews
   Carry out internal audits or reviews to identify and rectify discrepancies before HMRC does.
3. Implement a Documented Tax Strategy
   A documented approach to tax planning and compliance demonstrates a proactive stance and reduces perceived risk.
4. Seek Professional Representation
   Having a qualified advisor to represent your interests during an HMRC enquiry can ensure a more informed and balanced process.
5. Stay Informed of Policy Updates
   Frequent changes in tax legislation, such as changes to capital allowances or IR35 rules, require continuous attention. Visit the UK government’s tax policy updates for the latest developments.

While we operate across the UK, Cogency CF has deep roots in the Northwest. Businesses based in Greater Manchester, Cheshire, Merseyside, Lancashire, and Cumbria benefit from our regional presence, which allows for:

• Localised insights into regional economic conditions and funding schemes
• Face-to-face consultations with our senior advisory team
• Familiarity with local business networks and regulatory expectations

Whether you are a fast-growing SME or a mature enterprise, our expertise supports informed, compliant decision-making that helps you stay ahead of risk.

Cogency CF has earned its reputation through decades of strategic advisory excellence. Our commitment to integrity, rigour, and client-centric solutions positions us as the preferred financial advisor for UK businesses navigating complex challenges.

To learn how our financial due diligence services can protect your business before HMRC comes calling, contact our team today or visit our homepage for more information.