HMRC Tax Enquiries: A Complete Guide

An HMRC tax enquiry (also called a compliance check) is an investigation into your tax affairs to verify that your returns are accurate and complete. HMRC has extensive powers to open enquiries, request information, and adjust tax liabilities. Understanding the process and your rights is essential if you are selected for an enquiry.

Aspect vs Full Enquiries

HMRC distinguishes between two types of enquiry. An aspect enquiry focuses on a specific area of your return, such as a particular deduction, a source of income, or a relief claimed. It is limited in scope and should be resolved quickly if you can provide the requested information. A full enquiry examines your entire tax return and may extend to multiple tax years. It is more intrusive and time-consuming, often involving detailed questions about your business, investments, and lifestyle.

HMRC does not always tell you which type of enquiry you are facing at the outset. However, the scope tends to become clear as the enquiry progresses. If HMRC starts asking about areas outside the initial scope, you should consider whether the enquiry has expanded and seek professional advice.

COP8 and COP9

COP8 (Code of Practice 8) is used where HMRC suspects that a taxpayer has entered into a tax avoidance scheme that requires investigation. It applies to complex avoidance cases where the issue is about the interpretation of tax law rather than the accuracy of the facts. COP8 enquiries are civil in nature and typically involve specialist HMRC teams.

COP9 (Code of Practice 9) is used where HMRC suspects tax fraud involving deliberate behaviour. It is part of the Contractual Disclosure Facility (CDF), which offers the taxpayer an opportunity to disclose the full extent of the fraud in exchange for immunity from criminal prosecution for the tax offences covered by the disclosure. COP9 is a serious process and requires immediate professional advice.

The Notice of Enquiry

HMRC must issue a formal notice of enquiry under Schedule 1A TMA 1970 to open a compliance check. The notice tells you which returns are being checked and the period under review. For self assessment returns, HMRC has 12 months from the date the return was filed to open an enquiry (the enquiry window). If the return is filed late, the window is extended to 12 months from the date of actual filing, up to a maximum of 18 months from the filing deadline.

HMRC can also open an enquiry into a return that has been amended by the taxpayer, within 12 months of the amendment. Once the enquiry window has closed, HMRC can only open an enquiry if it discovers a loss of tax caused by careless or deliberate behaviour (a discovery assessment).

Records Requests and Information Powers

During an enquiry, HMRC will request records and information relevant to the return under review. This can include bank statements, invoices, receipts, contracts, email correspondence, and board minutes. HMRC has formal information powers under Schedule 36 to the Finance Act 2008, which allow it to require the production of documents and the provision of information.

You are entitled to know why the information is needed and to challenge requests that are unreasonable or disproportionate. If you refuse to comply with a formal information notice, HMRC can apply to the tribunal for a penalty, and in serious cases, for a criminal prosecution.

Meetings and Site Visits

HMRC may request a meeting to discuss your affairs as part of the enquiry. Meetings can be held at HMRC's offices, your home, your business premises, or your adviser's office. You have the right to be accompanied by your tax adviser at any meeting. You are not required to answer questions without your adviser present.

Site visits are less common but can occur, particularly where HMRC wants to inspect business premises, stock, or records. HMRC must give reasonable notice of a site visit, and you are entitled to have your adviser present during the visit.

The Closing Letter

At the conclusion of the enquiry, HMRC issues a closure notice setting out its findings and any adjustments to your tax liability. If you agree with the findings, you can accept them and pay any additional tax, interest, and penalties. If you disagree, you can appeal to HMRC and subsequently to the tribunal.

If HMRC issues a closure notice, the enquiry is formally closed, and HMRC cannot re-open the same return unless it discovers new information that could not reasonably have been known at the time of the closure.

Appeals Process

If you disagree with HMRC's findings, you have 30 days from the date of the closure notice to appeal. The first step is a statutory review by a different HMRC officer. If you are unsatisfied with the review, you can appeal to the First-tier Tribunal (Tax Chamber). The tribunal process is described in more detail in our separate guide to tax appeals.

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