This guide will help you if you are the subject of an enquiry by HM Revenue & Customs (HMRC). You have rights and must be treated fairly. In this section we will help you understand the process and your rights. We then provide detailed sections, exploring enquiries that can arise from your tax return or from a tax credits claim. In either case, this may result in a further enquiry being opened into your tax credits claim or self assessment return respectively.
If you are self-employed, in addition to this section, you should also look at the page in the ‘self-employment section’ of this website, as that section includes information on specific issues you might face in relation to information you might be asked to provide, proposed changes to your figures and the costs of an enquiry.
Basic information on enquiries
What is an enquiry?
It may be called an enquiry, an investigation, an intervention or a check. Basically it means that HMRC are going to ask you some questions and possibly look at some of the documents you have used or will use to complete your tax return or tax credits claim. 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 in the section ‘Enquiries in more detail[jw1] ’.
What is the difference between an aspect and a full enquiry?
An aspect enquiry looks at only one or a few specific areas of your tax affairs whereas a full enquiry reviews all matters.
Can an enquiry happen before I have sent in my tax return?
Not usually. These are called business records checks or pre-return checks, but the process is similar to an enquiry. These checks are designed to look at your record keeping.
How can I find out why I have been chosen for an enquiry?
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.
I do not think I can deal with an enquiry just now
I have done nothing wrong. Can I ignore this?
No, you must deal with it or HMRC may believe you are hiding something and take extra steps to obtain more information.
I do not have time to deal with this just now. Can I ask them to deal with someone else now and look at my records next year?
You can approach HMRC to explain your current circumstances. 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
The Human Rights Act 1998 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.
What are these extra rights I am given under the Human Rights Act?
- 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.
Enquiries in more detail
The detailed sections below give information on some of the issues you might face if HMRC enquire into your tax affairs or your tax credits claim.
What is a stand-alone self assessment enquiry?
Generally this is an enquiry into your self assessment tax return alone.
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.
Information you may be asked to provide
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.
Proposed changes to figures in your tax return
The HMRC officer has changed various figures in my tax return, resulting in a much higher taxable income figure. What can I do?
You should consider whether the figures presented to you are in agreement with your records and memories.
Stay calm and rework the figures yourself, if necessary.
Now that I have reviewed things, I think my taxable income may be significantly understated. What do I do now?
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.
Note that any adjustments to your position may affect any claim you have made for tax credits.
Any additional tax due will attract interest and possibly penalties.
The enquiry is not finished but it looks like there will be extra tax to pay. When should I pay it?
Making a payment on account as soon as possible will minimise any interest charge and also demonstrate your commitment to cooperating fully with HMRC. Any payment you make should be on a voluntary basis and without legal obligation so that it may be repaid if you change your mind. You can pay in any of the ways you would normally pay self assessment tax, as described on GOV.UK. You should also speak, or write, to the HMRC team dealing with your enquiry to let them know you are making or have made the payment so they can note your records that the payment should be treated as a payment on account towards settlement of the enquiry. Keep a copy of your letter, or a note of the telephone conversation (including date, time, to whom you spoke and what was said).
Costs of enquiry
My enquiry has now finished. What about all the costs I have had to pay to let me answer the questions raised by HMRC?
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.
How do I know if HMRC acted outside their own guidelines?
How do I complain?
You can complain either by telephone or in writing, depending on the type of complaint. Make sure you have all your facts to hand so that your complaint can be presented in a logical way. You can find out more in our complaints section and on the GOV.UK website.
Unable to agree with HMRC
I cannot agree with HMRC, how do I take the case further?
You could try out a new service called Alternative Dispute Resolution.
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.
HMRC are now opening up earlier tax years to try to make adjustments. Can they do this?
While HMRC are within the period when an enquiry may be opened , normally one year from when the relevant tax return was lodged, they can do so using the normal procedure.
If they are now outside this time limit they can only open earlier years by means of discovery assessments.
What is a discovery assessment?
This is an estimate made by HMRC of your profits for earlier years. Such an assessment can only be issued where HMRC have reason to believe you have acted carelessly or have deliberately misstated your accounts. This might be because they have found significant errors in accounts that are already under enquiry. Such discovery assessments may only be issued within six years of the end of the year of assessment where there has been careless behaviour, but can be issued within 20 years if the behaviour was deliberate.
Enquiries into tax credits claims can take place before any payments are made to you, during the period when payments are being made or after the time when the claim is finalised. These first two are generally called examinations to distinguish them from enquiries that take place after the tax year has ended and your tax credits claim is finalised. We will call them all enquiries.
HMRC use these enquiries to check the income details you have provided them with.
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 self assessment tax return that was not part of this enquiry.
Can they stop my tax credit payments because I did not provide them with information they asked for?
Yes, they can. Normally you should reply within 30 days.
Why are HMRC looking at both my own and my partner’s income?
If you made a joint claim, then they do need to look at both sets of income.
HMRC have already checked my income and now they’re doing it again. How often can they do this?
I do not agree with the decision taken on my tax credits payments. What can I do?
You can ask HMRC to look at the case again by requesting a Mandatory Reconsideration, and if you are still unhappy apply to have your case heard by an independent Appeals tribunal.
I have been told I cannot appeal against having to pay back the amount of tax credits that were overpaid to me. Is that right?
That is correct, but you can ask for a Mandatory Reconsideration followed by an appeal if you think the original amount of tax credits awarded to you was wrong.
I have agreed an amount of tax credits to be repaid due to adjustments to my income. Can I be charged a penalty?
Yes, you can. You will automatically be charged interest but penalties are charged based on your behaviour.
What else happens at the end of a tax credits enquiry?
If the enquiry found that your income figures were incorrect, this might lead to a self assessment enquiry. Be careful not to agree to any settlement on tax credits before you understand the impact on your other tax liabilities.
Where can I find out more information on tax credits enquiries?
HMRC have produced a series of leaflets that you may find helpful:
What to do if you think our decision is wrong
|COP26||What happens if we have paid you too much tax credit?
Why overpayments happen, how to pay them back, when you do not have to – and how to dispute an overpayment.
|WTC/FS2||Tax credits examinations
What happens if your tax credits claim is selected for checking.
|WTC7||Tax credits penalties – what happens at the end of a check
A leaflet about the penalties you may get if your claim for credits is not correct.
|WTC/FS1||Tax credits enquiry
What happens if your previous tax credits award is selected for checking.
|WTC/FS9||Tax credits - suspension of payments
What happens if you have not given the Tax Credit Office the information they asked for.
|WTC/FS3||Tax credits formal request for information
A fact sheet the Tax Credit Office sends you, if you have not provided the information they asked for.
|WTC/FS4||Tax credits meetings
What happens if the Tax Credit Office asks to meet you to discuss your claim.
|WTC/FS10||Tax credit checks
What happens if your current or previous tax credits award is selected for checking.