Tax can get complicated and sometimes mistakes happen. By working with HMRC and finding help, you can help resolve any errors on your tax return.
Why might there be a tax enquiry?
If HMRC find an obvious error on a tax return, they can correct it within nine months of the date on that it was filed. An obvious error is one where it’s clear what the correct answer should be. For example, if something has been wrongly added up.
If the error is not obvious and the nine month deadline has passed, the return can only be changed through a formal enquiry.
When can HMRC start an enquiry?
An officer from HMRC can start an enquiry into any return within 12 months of the date it was submitted. This includes returns that you have made changes to.
If the return was submitted late, HMRC can start an enquiry within 15 months instead of 12.
HMRC must issue a formal notification that they’re starting an enquiry and you have to receive this before the enquiry deadline.
Why has my return been selected for an enquiry?
An enquiry could happen because HMRC has specific questions about a piece of information on the return. This can be resolved by answering the question. If HMRC are happy with the answer, they’ll close the enquiry.
Other enquiries focus on things that may have been left out of the return. Some returns are chosen at random for compliance checks. HMRC do not tell you If your return has been selected at random.
HMRC uses a software called Connect, a system that holds over 55 billion items of data relating to taxpayers. The data includes:
- earnings and pension information
- bank records from the UK and over 60 overseas countries
- savings and investment records
- credit and debit card accounts
- records of activity on on-line platforms such as eBay and Airbnb,
- Land Registry data
- social media activity
Using Connect, HMRC may find information that suggests your tax return may not be complete or correct.
What types of enquiry are there?
HMRC may do a full enquiry, which checks all the information on the return.
Alternatively, HMRC may do an aspect enquiry. This checks information on one or more specific things. For example, if they have information that investment income has been received but it has not been included on the return.
The aspect enquiry will ask for information about the specific issue that has been left out. However, if there appears to be more they need to look at, the enquiry can be broadened into a full enquiry.
What happens in an enquiry?
HMRC must notify you of that they’re starting an enquiry. They have to follow a specific and detailed process when they carry out an enquiry. Find out more information about the process.
HMRC will ask for you for information and ask you explain the issue they think may be wrong on your tax return. They may ask to see documents and records that confirm the entries made on the return.
HMRC should only request information or documents that can help them check how much tax you should be paying. If you’re not sure why they are asking a particular question or want to see a particular document, you can ask the HMRC officer to explain.
What do I need to share with HMRC?
HMRC use enquiries to make sure that you are paying the right amount of tax. You should try to answer the questions they ask and provide the information they ask for. It doesn’t mean that you must agree with everything they say, and you can challenge them if you think they are incorrect or abusing their powers.
What if I don’t give HMRC the information they’re asking for?
If you don’t send HMRC the information they’ve asked for, they will then send a formal request. If you miss the deadline to send HMRC the information, you may be charged a penalty.
It is better to provide information quickly and voluntarily. This demonstrates to HMRC that you are cooperating and can help reduce potential penalties.
Will I need to go to a meeting?
HMRC can request a meeting. You can also ask for a meeting with HMRC if you think it would help answer their questions.
If HMRC ask for a meeting, you don’t have to go. But if you do go, it will show HMRC that you are happy to work with them to resolve the enquiry.
When you attend a meeting, you can take a friend, relative or professional advisor with you. You can ask that the meeting is held at a place of your choice instead of HMRC offices.
Ask HMRC for an agenda in advance of the meeting so that you can be prepared. Ask how long the meeting is expected to last.
After the meeting, ask for a copy of HMRC’s notes and check them carefully. If you disagree with anything, notify HMRC in writing. If you said something that was incorrect or incomplete in the meeting, let HMRC know.
The outcome of the enquiry
When the enquiry is finished, HMRC will tell you if they have accepted the return or if it needs to be changed.
If HMRC think that your tax returns are incorrect, they will send a schedule of adjustments. This is a list of figures that they think need to be changed. You don’t have to agree with these, and you can put forward your own suggested figures.
If HMRC don’t think the figures are wrong because you’ve been negligent, they will ask that you change the return. If you don’t do this within 30 days, they will change it themselves. There will be interest on any late payment of tax.
Contract settlement agreements
If HMRC thinks that the figures were wrong because you were negligent, it will usually issue a contract settlement agreement. This will show the amount of underpaid tax and ask you to make an offer in settlement (an offer of how much you can pay towards the bill). This includes interest and penalties.
Under the settlement, you agree to pay the tax, interest, and penalties and HMRC will agree to give up its rights to pursue you the full amounts you owe.
The contract is legally binding and is difficult to change once it’s signed.
You will be expected to pay the full amount agreed immediately. Interest will be charged if payment is late. If you need time to pay the full amount, you should let HMRC know before the agreement is signed.
What if I still don’t agree with the amount owed?
If you can’t agree with HMRC the amount of tax owed, there are three ways in which you can try to resolve the case; an internal review, an alternative dispute resolution, or a First Tier Tax Tribunal.
Internal review
You can ask HMRC for an internal review. An HMRC officer who has not been involved before will review all the information about your case. Thay may reach a different conclusion.
Alternative dispute resolution
Alternative dispute resolution (ADR) is where a specially trained HMRC officer (called a facilitator) works with you and the HMRC officer working on your case. The aim is to come to an agreement about your case. The facilitator will not have been involved in your case or the dispute before.
Entering the ADR process will not affect your existing review and appeal rights.
ADR is a quick and flexible process. It can be helpful to do this before HMRC make a formal decision about your case. ADR can help focus on areas of the dispute that you think need to be clearer. It can be particularly helpful where:
- communication has broken down
- there is disagreement about the facts
- there is misunderstanding about how information and evidence has been used or disregarded.
If your case goes to a tribunal hearing, ADR can help make the issues clearer. Whatever the outcome of the ADR process, you will still be able to appeal HMRC’s formal decision.
Here is more information about ADR. If you are not sure whether ADR would be suitable for your case, you can email HMRC Dispute Resolution Unit at dispute.resolution@hmrc.gsi.gov.uk.
First Tier Tax Tribunal
HMRC can make a formal decision about how much tax they think is due. This is called a determination. This means you have to pay, by law. However, you can appeal against this determination to the First Tier Tax Tribunal.
Where can I find help?
Working with HMRC to work out the right amount of tax can be stressful. However, they are they to help find a solution.
If you need more help, you can contact our helpline.