HMRC enquiries and investigations
What triggers an HMRC enquiry, what they look at, and how to manage one without unnecessary cost.
Articles
What an enquiry actually is
A compliance check into a return — HMRC formally asking questions, with statutory information powers behind them. Most are 'aspect' enquiries into one entry; some are full enquiries into an entire return. The opening letter defines the scope, and holding HMRC to that scope is half the craft of managing one.
HMRC normally has twelve months from filing to open an enquiry into a return filed on time. Outside that window it needs a 'discovery' — and the later it is, the more the time limits depend on behaviour: four years for ordinary errors, six for careless, twenty for deliberate.
What triggers one
Data mismatches, mostly: figures that disagree with what banks, employers, letting agents, deposit schemes, card processors, and overseas tax authorities report. Also profile: margins far from the trade's norm, persistent losses funding a visible lifestyle, round numbers, and late, amended, or inconsistent filings. A small number are random.
The defence is boring and effective — returns built from reconciled records, so every figure has a document behind it.
How the process runs
Questions and information requests, in writing, usually in rounds. You must provide what is reasonably required for the check — and are entitled to push back on requests beyond the scope or the statutory powers. Meetings are sometimes proposed; they are rarely obligatory and never casual.
Enquiries end with a closure notice: no change, or an amendment with tax, interest, and behaviour-based penalties. Where agreement fails, the tribunal route exists — but most enquiries settle by correspondence, and settle better when the early answers were precise.
Managing one well
Respond on time, answer exactly what was asked, and never guess — a wrong answer given confidently does more damage than a pause to check. Get representation involved from the opening letter, not from the third round: scope, tone, and disclosure decisions made early are the ones that set the outcome.
For RR clients the Evidence Pack means the records HMRC asks for already exist in order. Enquiries still take months; they stop being existential.
Frequently asked questions
How long does an HMRC enquiry take?
Aspect enquiries often close in three to six months; full enquiries routinely run past a year. The pace is driven by rounds of correspondence — complete, prompt answers shorten it, and every vague answer buys another round.
Can HMRC look at earlier years too?
Yes, if the enquiry finds something suggesting earlier returns are wrong — discovery rules then reach back four years for ordinary errors, six for careless, up to twenty for deliberate. This is why the first year's handling matters beyond its own numbers.
Do I have to attend a meeting with HMRC?
Generally no in a civil compliance check — questions can be answered in writing, and where a meeting genuinely helps, it should be prepared, minuted, and attended with your adviser. Unprepared meetings are where cases go wrong.
What does an enquiry cost me if my return was right?
Time and professional fees; no tax, no penalty, and the closure notice says no change. Fee protection insurance exists for exactly this — many firms, ours included, offer cover so a clean enquiry costs the client nothing but patience.