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HMRC internal manual

Self Assessment: the legal framework

HM Revenue & Customs
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Enquiries into Tax Returns: some notes on HMRC enquiries

Corrections, minor queries and enquiries

The right to ‘correct’ the entries in a tax return (see Corrections of errors or omissions in the tax return in SALF204) is quite distinct from the right to ‘enquire’ into the accuracy of the information in the return.

A correction is simply the amendment of the tax return to put right an obvious error or omission in the return, or the associated computations. In contrast an enquiry may be concerned with the accuracy and technical validity of the entry itself.

HMRC officers may, when processing the return, identify minor issues that need to be clarified if the return is to be accurately processed at the first attempt. These are referred to as ‘Minor Queries’. Customers or agents will be contacted by telephone if there is a need to settle a minor issue and HMRC officers work to strict guidelines when undertaking work of this nature. HMRC officers may also correct returns by reference to information available to them.

Enquiries comprise a mixture of selected audits and random audits

Although HMRC have the right to check any tax return, at random, including those in which everything appears to be in order, most enquiries are selected according to risk, for example, on the basis that there is significant tax at risk, or a suspicion that something is wrong.

In addition to the risk-selected enquiries there are a smaller number of random selections.

HMRC do not say whether a particular enquiry was selected on risk or randomly, but may identify particular areas on which the enquiry will focus.

Extent of enquiries

Some enquiries simply question obvious errors that were not identified during the initial processing and some merely require a straightforward clarification of a single item in the tax return.

Others comprise a more detailed examination of some technical aspect of the tax return, for example, whether a particular expense is allowable for tax purposes. Some large businesses are the subject of detailed technical reviews each and every year.

Yet others involve a full in-depth review of the taxpayer’s affairs including the records underlying the entries in the tax return.

Time limits for commencement of enquiries

The period in which an enquiry can be opened allows information from third parties - employers, contractors, financial institutions - to be used in the enquiry selection process. It also allows HMRC to plan an efficient annual cycle of work.

Time limits for enquiries following an amendment

Section 9A(2)(c) & (5)

Whenever a tax return is amended by the taxpayer, a new period for potential HMRC enquiries begins (ie the period given by Section 9A(2)(c)). In most cases any subsequent enquiry is limited to the area of the tax return that was amended, but there are cases in which the amendment is so fundamental to the tax return that the whole return is considered for enquiry.

For example the original tax return may have contained a provisional figure. If the correction of the provisional figure only altered a single entry in the tax return any subsequent enquiry (after the end of the period for enquiring into the original return) would be limited to that entry. But if that correction altered a number of entries, or radically altered the overall self-assessment, it is possible that more of the tax return, and possibly the whole return, would be considered for enquiry.

Enquiries after time limit for notice of enquiry has elapsed

It is not possible for HMRC to commence enquiries under the Section 9A powers once the time limit for giving a notice of enquiry has passed. Any enquiries commenced outside these time limits may only be made for the purposes of a discovery assessment under Section 29 (see SALF409 onwards). HMRC may sometimes refer to such cases as ‘investigations’, in order to distinguish them from enquiries pursued under the S9A powers. In such cases HMRC have to rely on the information powers in FA08/Sch36 to support the investigation. Discovery assessments are limited to where a loss of tax has been brought about carelessly or deliberately by the taxpayer or a person acting on his behalf, or there has been a failure to disclose all the relevant information.

Where a change is required to the liability for an earlier year because of an event in a later year, for instance a claim is validly made outside a return after the time when the return can be amended, this does not re-open that earlier year for enquiry (in this context see Any such claim is to be given effect in ‘the later year’ in SALF611).