Tax checks and enquiries

Enquiries and compliance checks

If HMRC look into your tax affairs, this may be called an enquiry, an investigation, an intervention or a compliance check.

During an enquiry, HMRC ask you questions about your tax return. They may also ask to look at some of the documents you have used or will use to complete your tax return. HMRC have the right to ask to see information or documents that they reasonably require for the purpose of checking your tax position. The various steps of an enquiry are explained in more detail below.

An enquiry can only be opened when you have sent in a tax return. Broadly, if you filed your tax return on time and made no changes to it, HMRC have 12 months from the date you filed the return in which to open an enquiry. Do not be afraid to challenge HMRC if you believe they are outside the time limit when an enquiry might be opened.

A check can only take place before a return is submitted. So in a check, HMRC should be looking at current records rather than those that have been used to prepare a tax return that has already been submitted. HMRC use checks so that they can check how your business records are being kept and make suggestions to you about these, if necessary.

Aspect and full enquiries

An aspect enquiry looks at only one or a few specific areas of your tax affairs. A full enquiry reviews all matters.

Stand-alone self assessment enquiries

Generally, this is an enquiry into your self assessment tax return alone.

If you also claim tax credits, it is very important that you do not finalise and agree any figures in a stand-alone enquiry without understanding the possible implications for your tax credits claim that was not part of this enquiry.

How HMRC choose to enquire into your tax affairs

You may have been chosen at random. HMRC believe that carrying out some random checks encourages everyone to deal with their tax affairs properly.

Alternatively, HMRC might believe that there is an error in your tax return or that the income you are showing does not appear to support your lifestyle.

Normally, you will not be told why you were selected for enquiry.

What to do if HMRC start an enquiry

Do not ignore the enquiry, even if you do not think you have done anything wrong.

If you do not deal with it, HMRC may believe you are hiding something and take extra steps to obtain more information.

If your current circumstances mean you do not have time or the ability to cope with an enquiry, you can approach HMRC to explain your position. In most cases they will be prepared to give you extra time to answer their enquiries, but they will still proceed.

Special rights you have in an enquiry

Article 6 of the European Convention on Human Rights (enacted in UK law by the Human Rights Act) gives you special rights because although tax errors and penalties are not normally considered to be criminal offences in the UK, they could be so considered in Europe. This is the case where penalties are substantial and are due to dishonest or reckless conduct.

These special rights are as follows:

• You have the right to a fair trial by an independent and impartial tribunal.
• You have the right to be presumed innocent until proved guilty.
• You may have the right to free legal assistance by either legal aid or public funding where you have not sufficient means to pay for your own representation, and where the interests of justice demand it. HMRC should provide you with a leaflet on this. You can find this leaflet on GOV.UK.
• You also have a right to privacy and any intervention by HMRC must be proportionate to the nature of their enquiry. In other words, they must take account of the costs of dealing with any questions they raise during an enquiry.

At present, these protections continue to apply even though the UK is no longer a member of the European Union.

Information HMRC can ask for

HMRC have the right to ask for information and/or documents that may reasonably be required to enable them to check your tax return. This may include bank statements, invoices, receipts etc. If you think you are being asked for records which are unreasonable, for example you run a self-employed business and you are asked for your spouse’s bank statements, you should ask HMRC why they think they are relevant to the enquiry.

If the information or documents that HMRC request are reasonably required, but you fail to provide them to HMRC, then HMRC may charge you a penalty of £300. If you have a reasonable excuse for not providing the information, HMRC will not charge a penalty, as long as you then provide the information or documents within an agreed timescale.

There is more information on our page Taxpayer information notices.

You should also note that HMRC may ask third parties for information that might affect your tax position. There is more information on our page Third party information notices.

The start of an enquiry

When HMRC open an enquiry

First of all, do not panic. HMRC might be asking you a question to clarify something they do not understand or to send them some particular documents. For example, if you had recently inherited a lot of money it would be reasonable for HMRC to ask where the funds came from.

Next, set up a folder that will hold all of the letters between you and HMRC relating to the enquiry, including copies of any documents sent (where possible). You should also include any notes of telephone calls you have made, giving dates and the name of the HMRC officer you spoke to. Try and send any information by recorded delivery so you not only have proof of postage, but also of receipt by HMRC.

HMRC use enquiries to make sure that you are paying the right amount of tax. You should normally try to answer the questions they ask and provide the information they ask for. HMRC should only ask for information or documents that are reasonably required to allow them to check your tax position. You can ask the HMRC officer dealing with the enquiry if you are not sure why they are asking a particular question or why they are asking for a particular document.

Generally, you should cooperate with HMRC and provide information and documents within the agreed timescales. But that does not mean that you should agree with everything that HMRC say, nor does it mean that you should not challenge HMRC if you think they are incorrect or abusing their powers.

If you think your tax returns may not be correct

If you deliberately held back some information when you completed your tax return, this is classed as a deliberate error. You should take professional advice as soon as possible.

If you are not sure if the information you gave to HMRC was right or wrong because your records were incomplete, you need to take professional advice as soon as possible.

Tax fraud

Tax fraud is an intentional act for personal gain at the expense of HMRC. This can be in relation to either tax itself or tax credits.

It means that your deliberate conduct has brought about a loss of tax. This may include:

• taking illegal steps to reduce your tax bill, such as omitting, concealing or misrepresenting information in your tax return,
• participating in the hidden economy and not declaring a whole source of income, or
• smuggling goods or generating repayments of tax fraudulently.

If HMRC suggest that you may have committed fraud, you need to take professional advice as soon as possible. You should also read HMRC’s guidance.

The rest of this guidance deals with errors that were not deliberate.

The stages of an enquiry

We set out the usual stages of an enquiry or check.

1. Opening letter

• Check that HMRC are within the time limits for opening an enquiry or check.
• Is the information HMRC asked for reasonable? If not, challenge them, by asking why they think the information is needed to check your tax position.
• Check you can comply with any timescale for providing information. If you think you cannot meet the timescale, contact HMRC as soon as possible to agree an alternative timescale.

2. Further correspondence

• If you do not comply with the original informal request for information, you will normally be sent a formal request. This means a penalty might be charged if you do not send in the information in the required timescale.
• You may be asked to clarify certain matters. If you are unsure how to respond or have made a careless or deliberate error, seek professional help.

3. A meeting may be requested

• A meeting can substantially cut down the time an enquiry takes. Remember you can request a meeting if you think that would help.
• Consider whether you want to attend a meeting. Normally attendance will demonstrate to HMRC more co-operation and so may reduce any penalties that might be sought, but you do not have to attend.
• If you are having a meeting, you may feel more comfortable being accompanied by a friend or adviser, especially as they may be able to take notes for you.
• You can request the meeting be held at a place of your choice rather than at HMRC offices.
• Always ask HMRC for an agenda before the meeting, so you can be fully prepared. And ask how long HMRC think the meeting will take.
• You have a right to privacy, so you do not have to discuss your tax affairs in front of anyone else unless you choose to do so.

4. During and after the meeting

• Ask HMRC to set out their concerns at the start. This will help you decide whether you think their questions are reasonable.
• Keep to the agenda. If further matters are raised that do not arise from items already discussed, point this out and ask to get back to the agenda. If, on the other hand, it is something that you can deal with quickly, you may wish to answer, but point out that you are making an exception in answering a point that was not on the agenda.
• Do not be afraid to say you cannot remember something – this can be as a result of stress at the meeting. You can send on more information later.
• If you do not understand anything, ask. You can also ask the officer to explain why they want to know something.
• You can ask for the meeting to be ended at any time or ask for a break. Do not allow yourself to be intimidated.
• Ask for a copy of HMRC’s notes of the meeting. Check them carefully and compare them to your own. Ask for any mistakes or misinterpretations to be changed.
• If you disagree with anything in the notes, put your concerns in writing. Also, if on reflection you think any of the information you gave in the meeting was incorrect or incomplete, this is your opportunity to put it right now. Do not delay in correcting any errors if the HMRC notes are delayed.
• In a simple enquiry, you should have no qualms about signing notes of a meeting.

5. Closing the enquiry

• Hopefully you are now in a position to have the enquiry closed with no adjustments, if HMRC have been satisfied by your explanations, or with some agreed adjustments if errors have been found.
• Remember you can ask for the enquiry to be closed at any time if you think HMRC are drawing it out unnecessarily.
• You should ask HMRC to confirm you have claimed all of the reliefs and allowances you are entitled to.
• If HMRC intend to charge you a penalty, you should read our page Tax penalties and interest.

During an enquiry

You made a mistake in your tax return

If HMRC ask you to provide a document, and you then realise you made a mistake in your tax return, you need to provide the document and also tell HMRC that you realise now you made a mistake. If there was a reason for this, tell them that as well.

For example, you may have simply misread £360 as £630. Being honest and straightforward will help get things resolved as soon as possible with the smallest penalty.

There is information about inaccuracy penalties on our page Tax penalties and interest, including what you can do to reduce any penalty HMRC charge.

The tone of HMRC’s letters and complaints

The tone of HMRC enquiry letters can upset some people. On occasion you may be able to complain about the letter – it depends on what the letter says.

Sometimes HMRC have to quote certain legislation when they open an enquiry so that they are properly acting within the law. This may seem formal and threatening, but it is unlikely to be the basis for a complaint.

On the other hand, if the letter is rude or demeaning, you can complain.

The length of time HMRC take to reply to you

Often, HMRC will set a timeframe within which you should reply to their letters.

However, sometimes, HMRC can take much longer to reply to your letters. You are entitled to complain if you feel there is unacceptable delay in dealing with your affairs.

Relevance of documents requested

HMRC may ask you to produce documents that you are not sure are relevant to the enquiry. For example, they may ask for documents relating to your home, even though it is owned by your spouse. If this happens, you should explain the position to HMRC. It may be in your interest to provide the information anyway, if this is relevant to the enquiry.

Difficulty in meeting HMRC’s timescale

HMRC may ask you to send them a lot of information, but you may know that you will not be able to comply with their timescale. This might be because you are about to go on holiday or go into hospital for a planned procedure.

You should contact HMRC right away and explain the situation. You should suggest an alternative date by which the documents will be made available. You should ensure that any alternative timescale you agree with HMRC is realistic and that you comply with it.

The end of an enquiry

Changes to figures in your tax return

The HMRC officer may change various figures in your tax return following the enquiry. They will often send you a proposed schedule of adjustments setting out the changes. You do not have to agree this, but the schedule is normally made up of adjustments that you have agreed with HMRC during the enquiry.

You should consider whether the figures presented to you are in agreement with your records and memories. You should check the figures and rework them yourself, if necessary.

If you think that you have previously understated your income, you should consider whether you need to take professional advice. If you decide to do this, make sure you let them deal with HMRC on all matters relating to the enquiry, although you should have input to any responses your advisers make on your behalf. Also be aware that this may lead to enquiry into any tax credits claim you might have made.

If you agree with the proposed schedule of adjustments, HMRC will then issue you with a contract settlement agreement. It will show the tax payable and will ask you to make an offer to fully settle the tax together with any interest or penalties that might be charged. Normally HMRC will provide you with a guide of the sum that they expect and they should also issue you with a penalty explanation letter. Although interest will be charged automatically, you should check the penalty charged carefully as you are still able to negotiate the penalty position.

HMRC may also ask you to sign a statement of assets and liabilities. This statement shows all of your assets and liabilities at a particular date. If you are married or in a civil partnership it normally includes those of your spouse or civil partner too. You do not have to sign such a statement, but if you refuse HMRC may well think you have something to hide. Take great care when you sign the statement as if it is later shown to be inaccurate, you could be charged higher penalties in the future.

What to do if you are unable to agree with HMRC

If you do not agree with HMRC’s adjustments then HMRC can issue an assessment based on their figures. You will then have to dispute that assessment.

You could try out HMRC’s Alternative Dispute Resolution service.

Alternatively, you must make a formal appeal to the First-tier Tribunal to have the enquiry closed. Before you do this, make sure you are comfortable that you will obtain a better outcome than coming to a compromise agreement with HMRC. You may obtain a worse result at the tribunal if you have incomplete records and have been unable to satisfy HMRC of the levels of your private income and expenditure.

Enquiries and extra tax

You should continue to make any tax payments that are due during the enquiry as normal.

In relation to the enquiry, if you think there will be extra tax to pay, you should start to set aside some money so that you are in a position to pay this once HMRC have confirmed the amount of any tax, interest and penalties payable.

They will do this when they send you a decision notice at the end of the enquiry.

The tax, interest and penalties will be due 30 days after you sign the offer document. If you will not be able to pay the whole sum in that timescale, you should tell HMRC as soon as possible. They may allow you up to six months to make the payment. Of course, the interest charge will increase slightly if you do not pay within 30 days. Keep a note of the telephone conversation (including date, time, to whom you spoke and what was said) and a copy of any letter you receive from HMRC about the payment plan.

If you agree with HMRC’s decision and you can pay everything that is due, you should make the payment as soon as possible following HMRC’s instructions. If you have not received instructions on how to pay from HMRC, you should use the details on GOV.UK.

Help with the costs of dealing with an enquiry

If there is no further tax to pay, then you will not be able to recover your costs from HMRC unless you can show that they acted outside their own guidelines (see below) or made a mistake. If you think this applies, you will need to make a complaint.

You can check if HMRC acted outside their own guidelines by referring to HMRC leaflet CC/FS1a, and also the HMRC Charter.

Adjustments to earlier tax years following an enquiry

While HMRC are within the period when an enquiry may be opened, normally one year from when the relevant tax return was submitted, they can do so using the normal procedure. See below for more information.

If they are now outside this time limit, they can only open earlier years by means of discovery assessments.

Rights and safeguards in an enquiry

We outline the rights and safeguards the law gives you when HMRC have given you a formal notice to enquire into your self assessment tax return.

Time limits for giving a notice of enquiry

There are strict time limits which HMRC must observe. The law does not permit them to enquire into your return outside these time limits.

Return filed on time

If you filed your return on time, HMRC have 12 months from the date on which you filed it to begin their enquiry.

So, if you filed your 2022/23 return electronically on, say, 30 November 2023, HMRC may not enquire into it after 30 November 2024.

Return filed late

If you filed your return late, HMRC have 12 months from the date on which you filed it, plus some extra time up to the next quarter day, to begin their enquiry. Quarter days are 31 January, 30 April, 31 July and 31 October.

So, for example, if you filed your 2022/23 return electronically on 28 February 2024, HMRC can enquire into it at any time up to 30 April 2025.

Amended return

If either you or HMRC amended your return after it was filed, HMRC can enquire into it for 12 months after the amendment was made, plus some extra time up to the next quarter day, but HMRC may only enquire up to that later date into the subject matter of the amendment.

For example, if you filed your 2022/23 return electronically on 30 November 2023, HMRC can enquire into the whole return until 30 November 2024. If you amend your return on 1 May 2024, HMRC have an extra 8 months to enquire into it until 31 July 2025, but during that extra time they can only enquire into the subject matter of the amendment.

Rights of appeal

You have certain rights of appeal to the first-tier tribunal, or to ask HMRC for an independent internal review, at various stages during their enquiry. For more details of how to exercise these rights, see factsheet HMRC1.

If HMRC decide during their enquiry to amend your return, you can appeal against their decision within 30 days of them making the amendment – although your appeal will not be referred to internal review, or heard by the first-tier tribunal, until the enquiry is completed.

You can also appeal against any decision HMRC make on conclusion of their enquiry, or any assessment to tax that they make, again within 30 days of their decision.

At any time during HMRC's enquiry, you can apply to the first-tier tribunal for a direction that they must close down their enquiry by a certain time. Then the tribunal must give that direction unless HMRC can prove to their satisfaction that they need to keep the enquiry open for longer.

More information

In all your dealings with HMRC, remember that there are standards of behaviour and values which HMRC should aspire to in their dealings with you. These are set out in The HMRC Charter. They also have principles of support for customers who need extra support that they should follow.

HMRC have produced a series of videos to help you better understand the compliance checks process. These are available to view on YouTube.

HMRC have published guidance on compliance checks, and about the help you can get during and after a compliance check.

HMRC have published leaflets on what rights you have in an enquiry.

If HMRC open a check into your tax credits claim, read our separate page HMRC tax credit checks.

If you need professional advice, you should aim to obtain help from a qualified professional, for example members of the Chartered Institute of Taxation.