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Introduction to enquiries

Updated on 18 June 2020

Self-employment

If you are the subject of an enquiry by HM Revenue & Customs (HMRC) you have rights and must be treated fairly. On this page we provide some basic information on enquiries and explain where you can find more information.

Image of a person working on a calculator with the word enquiry above
(c) Shutterstock / garagestock

Basic information on enquiries

An enquiry, which may also be called an investigation, an intervention or a check is the mechanism by which HMRC may scrutinise your income tax or tax credits affairs. Basically it means that HMRC will 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.

There is more information in the tax basics section on the following topics:

  • the difference between an aspect and a full enquiry;
  • why HMRC may choose to open an enquiry;
  • your rights in an enquiry;
  • stand-alone Self Assessment enquiries;
  • the information you may be asked to provide;
  • discovery assessments;
  • stand-alone tax credits enquiries.

There is also information on how to survive an enquiry by HMRC.

Paying tax at the end of an enquiry

At the end of an enquiry there is often a payment due to HMRC which has been negotiated as part of the enquiry. It can be a fairly substantial sum in some cases, and so you may not have funds available to pay the amount due in one payment.

If you cannot afford to pay your tax, you may be able to negotiate with HMRC, so that you can pay by instalments.

It is important to approach the HMRC officer dealing with the enquiry as soon as possible about payment arrangements.

There is more information in the tax basics section.

Penalties

There is information on the kinds of penalty that HMRC can charge you, either for missing a deadline or for making an error, in the tax basics section.

We look at particular issues that you might face if you are self-employed below.

Penalties for late payment of tax

Penalties are designed to encourage compliance with the tax system and have an actual cost for you. Late payment penalties do not apply to payments on account, but do apply to balancing payments. Details of the late payment penalties are in the tax basics section.

Tax based penalties

There is information on tax based penalties and how they are worked out in the tax basics section.

After an enquiry, my taxable profits were increased for one year and decreased for the following year. No further tax is due but I have been charged a penalty. Is this right?

This is because HMRC calculate penalties based upon the amount of tax that might have been lost because of an error. So even though overall you may not have more tax to pay, HMRC look at each tax year individually and if you did not pay enough tax in one year, they may try to impose a penalty. Follow the link above to our ‘tax basics’ section which gives more information about penalties – you might be able to ask HMRC to suspend a penalty for this type of inaccuracy.

How much can HMRC charge for the late notification of the start of my business?

The table in the tax basics section shows the scale of charges, based on percentages of tax lost. These are the same as other failure to notify or late notification penalties.

Can I be charged a penalty if my business records are found to be inadequate by HMRC?

Yes, HMRC can charge a penalty of up to £3,000 where accounting records are found to be inadequate. For more information, go to our page on business records.

Making a payment at the end of an enquiry

At the end of an enquiry there is often a payment due to HMRC which has been negotiated as part of the enquiry. It can be a fairly substantial sum in some cases, and so you may not have funds available to pay the amount due in one payment.

If you cannot afford to pay the agreed sum, you may be able to negotiate with HMRC, so that you can pay by instalments.

It is important to approach HMRC as soon as possible.

There is more information in the ‘tax basics’ section.

Alternative dispute resolution

You may find alternative dispute resolution (ADR) useful if you are currently experiencing an enquiry by HMRC and have, thus far, been unable to bring this to an end.

Alternative dispute resolution is a system that can be used by small and medium businesses, as well as individual taxpayers, to try and provide a quick and fair way to end disputes arising from compliance checks or enquiries.

We provide information on the following topics in the tax basics section of this website:

  • What is alternative dispute resolution?
  • When can I ask for my case to be referred for alternative dispute resolution?
  • What cases are not suitable for alternative dispute resolution?
  • What if I still do not agree with HMRC after using alternative dispute resolution?
  • How do I refer my case for alternative dispute resolution?

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