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HMRC internal manual

Self Assessment: the legal framework

Enquiries into Tax Returns: introduction

Outline of enquiry powers under self assessment

Under self assessment the critical examination of tax returns forms an integral part of the ‘process now-check later’ regime and represents a powerful deterrent to those who do not wish to comply with their tax obligations.

During the routine processing HMRC check the tax return to correct any obvious errors or omissions that come to light at that stage. Some telephone calls may be made to resolve any minor queries in order to ensure that the return is accurately processed at the first attempt. For many customers the tax return, including the self-assessment, is simply processed as submitted.

Once initial processing is completed HMRC check tax returns and have an explicit right to enquire into the completeness and accuracy of the information provided in any tax return. This right covers all enquiries, from straightforward requests for further information on individual items through to full reviews of books and records. It is supported by information powers.

It is not necessary to justify an enquiry by identifying particular aspects of tax the return that give cause for concern. So, in theory, all enquiry cases could be chosen on the basis of a random selection process. Random selection plays an important part in the regime, but the majority of enquiry cases are specially selected by reference to the information in the tax return, and other information in HMRC’s possession.

There are clear rules covering the time limits in which enquiries can be made, the nature of the information that can be sought and the conduct of the enquiry itself. At the end of any enquiry the taxpayer has full rights of appeal if they do not agree with HMRC’s findings. The taxpayer also has the right, at any time once an enquiry is started, to ask the tribunal to direct that a notice be issued completing the enquiry.

The time limit for enquiries only applies to the opening of an enquiry. It does not place any direct constraints on the time taken to complete the enquiry, because this varies according to the nature and complexity of each case. Once the time limit for enquiry has passed, HMRC will not be able to open an enquiry and subsequently amend a taxpayer’s self assessment and will only be able to make a further (discovery) assessment in a case involving a loss of tax brought about carelessly or deliberately or where there has been an incomplete disclosure of information.