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HMRC enquiries, compliance checks and discovery assessments 

HMRC undertake checks to validate the information submitted on the more than 10 million self-assessment tax returns it receives. Getting your tax compliance right in the first place can avoid this happening to you, ensuring your initial submission has all the necessary information needed; but if you have received an enquiry, compliance check or discovery assessment from HMRC we are here to help.

HMRC enquiries and compliance checks

HMRC refer to enquiries of any nature as compliance checks. In both cases the idea is to ensure that taxpayers are paying the right amount of tax at the right time.

However, whilst all enquiries are compliance checks, not all compliance checks are enquiries!

This is because compliance checks can involve HMRC in asking for records before a return has been received, usually if they think that there are “irregularities”. An enquiry, however, is made into a tax return.

In respect of an enquiry, generally, HMRC has 12 months from the date of filing a self-assessment tax return to open an enquiry. If an enquiry is not made into a tax return within 12 months, it is treated as final. Slightly different rules apply for other taxes, SDLT for example, and we can guide you on this.

HMRC may occasionally undertake more informal information checks in the first instance rather than opening a formal enquiry.

 

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Discovery assessments

In respect of self-assessment tax returns, HMRC can raise a discovery assessment beyond the 12-month limit for an enquiry in the following circumstances:

• Up to 4 years from the filing date if there is a loss of tax as a result of an incomplete return/disclosure;

• Up to 6 years from the filing date if it involves a loss of tax as a result of a careless error;

• Up to 20 years from the filing date if there is a tax loss due to deliberate conduct.

To raise a discovery assessment, the onus is on HMRC to prove that there has been an incomplete disclosure or a tax loss concluding an enquiry.

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Case Study

HMRC compliance enquiry

HMRC enquiry into personal tax affairs

Intro

A client of ours had been approached by HMRC enquiring into their Self-Assessment for the year ended 5 April 2022.

Issue

Our client has previously filed their 2021/22 themselves, with the help of another advisor, and it had come to light that there were various errors contained within the tax return.

How we solved it

We assisted our client with responding to HMRC by acting on their behalf during the enquiry process. We worked with the client to obtain all the relevant details and identify where there had been errors made on the initial submission. We helped our client perform correct calculations and to ensure the response to HMRC contained accurate figures. As the client had engaged us to assist with responding to HMRC, they were at ease that the response was handled professionally and this helps to show HMRC the client is co-operating to ensure their tax affairs are brought up to date.

The Outcome

Whilst there was a sum payable following submission of a response to HMRC, we managed to have HMRC agree to suspending all penalties applied in relation to the enquiry. This was a huge result for the client and saved him multiple thousands in penalties.

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