How far back can HMRC investigate?

“How far back can HMRC go?” is usually asked by someone who has realised something was wrong some years ago and wants to know whether it is still live. The honest answer is that the number of years is set by behaviour: whether the person took reasonable care, was careless, or acted deliberately. The same mistake can be closed to HMRC in one case and open for twenty years in another.

This guide sets out the two separate clocks HMRC works to, the time limits for each kind of behaviour, the longer limits for offshore matters, and what they mean for records and for anyone thinking about putting something right.

Two different clocks

HMRC has two distinct ways of reopening a tax year, and they run on different timetables.

An enquiry is HMRC checking a return that has been filed. For an individual’s Self Assessment return filed on time, HMRC has twelve months from the date the return was filed to open an enquiry under section 9A of the Taxes Management Act 1970. If the return was filed late or amended, the window runs to the quarter day after the first anniversary of the filing (31 January, 30 April, 31 July or 31 October). Company returns have a broadly similar window under Schedule 18 to the Finance Act 1998.

Once that window closes, the return is normally final — unless HMRC can make a discovery.

A discovery assessment is HMRC assessing tax for a year that is otherwise closed, on the basis that it has discovered tax was under-assessed. It can only do so if the conditions in section 29 of the Taxes Management Act 1970 are met. One of those conditions is time.

The time limits for a discovery assessment

These come from sections 34 and 36 of the Taxes Management Act 1970. Companies are subject to the same four, six and twenty year structure under Schedule 18 to the Finance Act 1998.

Two points are easily missed. First, “failure to notify” sits in the twenty-year column. Someone who never registered for Self Assessment when they should have — a landlord who never declared a letting, for instance — can find the longer limit applies even where nothing about the omission was deliberate. Second, the burden is on HMRC to show carelessness or deliberate conduct if it wants the longer limits; it cannot simply assert them.

An illustration

Take the 2020-21 tax year, which ended on 5 April 2021.

• If the figures were wrong despite reasonable care, the four-year limit expired on 5 April 2025. That year is closed.
• If the error was careless, the six-year limit runs to 5 April 2027. That year is still open, and will be for some months yet.
• If the error was deliberate, the year stays open until 5 April 2041.

The same error, in the same year, is closed, open for a few more months or open for another fifteen years, depending entirely on behaviour.

Offshore matters: up to twelve years

Where the lost tax involves offshore income, gains or assets, the limits are longer. The Finance Act 2019 extended the time limit for income tax, capital gains tax and inheritance tax involving offshore matters or offshore transfers to twelve years where the behaviour was not deliberate. Deliberate offshore non-compliance remains in the twenty-year column.

The extension applies from particular tax years rather than to everything, and there are exceptions, including where HMRC already had information from which it could reasonably have identified the loss. Whether it reaches a particular year is a question to check, not to assume. Offshore matters also carry higher penalty ranges than equivalent domestic ones.

What these limits are not

• They are not limits on criminal investigation. Where HMRC treats a case as criminal, the civil assessment time limits above do not govern it.
• They are not the same as record-keeping periods. The law requires most people in business or letting property to keep records for at least five years after the 31 January filing deadline, and companies for six years from the end of the accounting period. Those periods are shorter than HMRC’s longer assessment limits, which is why someone facing a six- or twenty-year enquiry may need to rebuild figures from bank records and third-party sources.
• They do not stop interest. Late payment interest runs from when the tax was originally due, so an old year that is still open carries interest for the whole period.

A Simple Assessment (PA302) is something else again: a bill HMRC calculates itself, without a tax return, from information it already holds. It is neither an enquiry nor a discovery. Our guide to why retired people keep getting tax bills explains when HMRC sends one.

Why this matters if you are thinking about a disclosure

For someone who knows a past return was wrong, the time limits decide how many years a disclosure has to cover. Too few, and the disclosure is incomplete — which can undermine the penalty position it was meant to improve. Too many, and tax is paid for years HMRC could not have reached.

The behaviour judgement drives both the years and the penalty, so it is the most important decision in any disclosure. The penalty rules also treat an unprompted disclosure — one made before you had reason to think HMRC was about to find the problem — more favourably than a prompted one. See our pages on voluntary disclosures and the Let Property Campaign for how those routes work, and discovery assessments if HMRC has already raised one.

Sources

• Taxes Management Act 1970, section 9A (enquiry into a personal return), section 29 (discovery assessments), section 34 (ordinary time limit of four years) and section 36 (loss of tax brought about carelessly or deliberately)
• Taxes Management Act 1970, section 28H (simple assessments), inserted by the Finance Act 2016
• Taxes Management Act 1970, section 36A (offshore matters and offshore transfers), inserted by the Finance Act 2019
• Finance Act 1998, Schedule 18 (company tax returns, enquiries and assessments)
• Finance Act 2007, Schedule 24 (penalties for errors)

This guide is general information, not advice on any particular case.