This page will help you if you are the subject of an enquiry by HM Revenue & Customs (HMRC). You should be aware that you have rights and that HMRC must treat you fairly. On this page we explain 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 tax return respectively.
Basic information on enquiries
If you are self-employed, in addition to this page, you should also look at the page in the self-employment section, which 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.
In all your dealings with HMRC, remember that you have rights as well as responsibilities. These are set out in ‘Your Charter’, which you can find on GOV.UK.
What is an enquiry?
It may be called an enquiry, an investigation, an intervention or a check. During an enquiry, HMRC ask you questions about, and may also ask to 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.
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?
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.
What should I do if I do not think I can deal with an enquiry just now?
I do not think I have done anything wrong. Can I ignore the enquiry?
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 an enquiry 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.
What special rights might I have in an enquiry?
Article 6 of the European Convention on Human Rights (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.
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.
What information may I 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.
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.
For more information, read the page How to survive an enquiry by HMRC. HMRC have published a factsheet about information requests, which also explains when you do not have to provide information and documents.
Can an enquiry result in changes to figures in my 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. If HMRC charge you a penalty, it will be for an error.
The enquiry is not finished but it looks like there will be extra tax to pay. When should I pay it?
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. There is more information about what happens at the end of an enquiry on the page How to survive an enquiry by HMRC.
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.
If you cannot pay the amount due, then you should let the HMRC officer dealing with the enquiry know as soon as possible. You may be able to agree a payment plan with them. 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.
Can I get help with the costs of dealing with an 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 on the page How do I complain to HMRC? and on the GOV.UK website.
What do I do if I am unable to agree with HMRC?
I cannot agree with HMRC, how do I take the case further?
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.
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 submitted, 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 tax liability for earlier years, in order to prevent a loss of tax. The loss of tax normally relates to:
- income or chargeable gains that have not been assessed to tax;
- an under-assessment of tax (including a Self Assessment tax return); or
- an excessive amount of tax relief.
If you have already submitted a Self Assessment tax return for the tax year in question, HMRC can only issue a discovery assessment where they have reason to believe either:
- you have acted carelessly or deliberately in submitting your tax return, resulting in a loss of tax; or
- when the time limit for issuing a notice of enquiry passed, HMRC could not reasonably have been expected to be aware of the loss of tax in the tax return.
Such discovery assessments may only be issued within six years of the end of the year of assessment where there has been careless behaviour, or within four years if there was no careless behaviour, but can be issued within 20 years if the behaviour was deliberate.
Longer time limits (up to 12 years) can apply where the unpaid tax is a result of an offshore matter or offshore transfer, irrespective of whether or not there was careless behaviour. The new time limits apply to tax years from 2015/16 (or from 2012/13 if there has been careless behaviour). HMRC have published detailed guidance. LITRG have campaigned against this and our concerns have been backed by the House of Lords.
What do I do if HMRC check my tax credits claim?
Read our separate page on tax credits checks.