Enquiries and penalties
This section will help you if you are subject to an enquiry by HM Revenue & Customs (HMRC). You have rights and must be treated fairly. We help you understand the process, your rights and what to do if you end up with unexpected debt.
HMRC may call an enquiry by another name, such as an investigation or a compliance check. Basically an enquiry means that HMRC ask you some questions and possibly request some of the documents that you have used or will use to complete your tax return or tax credits claim. HMRC have the right to see information or documents that they think they reasonably require for the purpose of checking your position.
HMRC charge penalties to encourage compliance with the system. Examples of when HMRC may charge penalties include for late submission of tax returns, for late payment of tax and for careless or deliberate errors in tax returns.
Enquiries and debt
We provide basic information on enquiries, what to do if HMRC start an enquiry into your tax affairs and your rights in an enquiry in the ‘tax basics section’ of this website. We also provide guidance on what to do if you end up with unexpected debt as a result of the enquiry.
How to survive a HMRC enquiry
There is a guide giving you practical information about how HMRC carry out an enquiry and what happens at the end of it in the ‘tax basics section’.
Enquiries in more detail
Enquiries 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 tax return respectively.
It is very important that you do not finalise and agree figures in a standalone enquiry without understanding the possible implications for your tax credits claim or Self Assessment tax return that was not part of the enquiry.
Alternative dispute resolution
Alternative dispute resolution (ADR) is a system that individual taxpayers, small and medium businesses can use to try to end disputes with HMRC arising from enquiries. You may find this option worth considering if you are subject to an enquiry by HMRC and you have been unable to bring this to an end.
There is a guide to ADR in the ‘tax basics section'.
What penalties might I be given?
HMRC can issue you with a penalty for various reasons. If you receive a penalty, HMRC should send you a Penalty Explanation Letter, which sets out the period over which the penalty has been charged and the type of penalty charged.
You can minimise any penalty by telling HMRC as soon as you become aware of any mistake in your tax affairs. If you tell HMRC before any enquiry has started, and before they have given you notice that they are to inspect your records, then your penalty will be reduced substantially. Even if an enquiry has started, you will receive a much lower penalty by cooperating in this way.
If you pay a penalty late, HMRC will charge interest on the penalty.
We provide information on the main types of penalty that HMRC can charge in the ‘tax basics section’.