HMRC Tax Enquiry

How to Deal with an HMRC Enquiry

Well-kept records and accurate tax returns are not always enough to avoid a tax enquiry. It is now clear that late tax returns or problems with late payments can trigger an investigation. If you are unlucky enough to receiving an investigation letter there are certain criteria which you can adopt to ensure you get the best result possible.

What is the Enquiry 

To be able to deal with any enquiry you must first establish if it is either an enquiry into one Aspect of the Tax Return or a Full Enquiry into everything on the Tax Return. It is important to note that HMRC needs a reason to extend an enquiry from aspect to full, so challenge this where appropriate.


Where to Seek TAX Advice

The best person to deal with an enquiry is not necessarily the most technically brilliant. Technical knowledge is vital, but equally important is knowledge of how the system works and the ability to negotiate effectively. Members of our tax team who worked for HM Revenue & Customs have dealt with all types of enquiries including Tribunal work.


Taxpayers Charter

This is fundamental to the way HM Revenue & Customs carry out their enquiries. Taxpayers should be informed of how the enquiry will be run, and can be represented at meetings if they wish. There are time limits in place, and HM Revenue & Customs will only be able to open an enquiry up to 12 months after fixed filing date. (This date can differ in certain circumstances). If you receive a letter relating to an earlier year then you should seek professional advice as the enquiry could be invalid.


Fee Protection

At the 2012 Tax Investigators Conference Kevin Igoe reported that HM Revenue & Customs were dealing more efficiently with cases where they knew the clients had cover. Fee protection will ensure that all your accountancy fees will be covered.
For more information please see our fee protection page.


Where to Find Information

The HMRC website at has a number of useful publications. The Enquiry Manual will give you details of how the Investigator will handle your enquiry, and the Business Income Manual will have information relating to specific expenses, incomes or reliefs. They are agood source of information – and there have been times when we have quoted the Enquiry Manual to HMRC and had a successful outcome.


Record Keeping

During an enquiry HM Revenue & Customs will ask for the business records. If there is no business bank account the personal accounts will need to be produced. As this contains a mixture of both private and business deposits and expenses proper records should be maintained to ensure the business ones can be easily identified. However tempting it might be to claim the records are missing/destroyed you should remember that penalties up to £3,000 can be charged if records have not been kept for five years from filing date. 

Non-business taxpayers need only keep their records for 12 months from the filing date. If an earlier year is requested by HM Revenue & Customs then this should be queried.



HM Revenue & Customs have a vast source of information available to them. While you might think they will never find out about the additional source of income you have from taxi driving at weekends. This is not so. At the click of a button they would find out who lives at your personal address with you, where you have lived before, if you had a mortgage on the property or if you were renting. They also have details of all properties in your name and when you bought them. They will even know that you had a taxi license.

If you seek representation you will be asked if there is anything you have omitted from your tax return. If you tell us at the outset we will do our best to help you; if not then there may be little we can do. Our word losses credibility if we are found at a later date to be wrong.


Always tell the truth

Be careful when attending a meeting with the Inspector. Do not be tempted to say the first thing that comes to mind just to satisfy HMRC.

For example, on one occasion HMRC asked what a taxpayer from Hull did in the evenings when he was subcontracting in London during the week. His answer to the Inspector was non-committal; he sometimes went drinking with other subbies off the site or stayed at digs and watched TV. The Inspector pursued this line until the accountant objected because this had nothing to do with the enquiry. Imagine his shock when the Inspector revealed that his client had paid for a taxi license in the borough of Tooting and had obviously been doing this during evenings. The accountant could do nothing more to help.



With HMRC needing to close the tax gap, they are no nearer finding those who pay no tax at all, but continue to persue those they already know about. Hoping to make them pay even more tax than they already do. As they need to meet targets themselves it is worth remembering that as the enquiry time lengthens so does your ability to negotiate a settlement. 50% of the total amount due is better paid now, than a possible 65% in two years time. 

If you are uncomfortable about doing this then contact us now.


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