HMRC tax investigations
An HMRC investigation can mean anything from a question about one figure on one return to a Code of Practice 9 case. Knowing which kind you have is what decides the next step.
Tell us what has arrived
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What HMRC means by an investigation
HMRC rarely uses the word. Most of what people call an investigation, HMRC calls acompliance check: an officer examining whether a return, a payment or a claim is right. A check can be informal, or it can be a formal enquiry opened under the legislation for a particular tax, with deadlines and appeal rights attached.
Above that sit the specialist civil routes run by HMRC’s Fraud Investigation Service, Code of Practice 8 and Code of Practice 9, and criminal investigation, which HMRC’s published policy reserves for particular kinds of case. The same letterhead can carry any of them, which is why the first job is always to establish exactly what has arrived.
By tax: what is being checked
Self Assessment and company returns
A formal enquiry into a Self Assessment return is opened under Section 9A of the Taxes Management Act 1970, and into a Company Tax Return under Paragraph 24 of Schedule 18 to the Finance Act 1998. Both have a fixed window in which HMRC can open them. Our page on compliance checks and formal enquiries explains the windows, Schedule 36 information notices and how an enquiry is closed. A company’s tax is normally the company’s alone, but in some cases HMRC can make directors and shareholders personally liable; see our guide to directors’ personal liability for company tax.
VAT
VAT checks often begin with a visit or a request for records, and can end in an assessment that has to be challenged on its own timetable. See VAT investigations and inspections.
PAYE and employer compliance
Employer compliance reviews look at payroll, expenses and benefits, termination payments, the status of workers paid as self-employed, and the National Minimum Wage. See PAYE investigations and employer compliance reviews.
Inheritance tax
HMRC reviews the account delivered for an estate and can question the values, reliefs and lifetime gifts reported in it. Our guide for executors covers how those enquiries run.
Offshore income and assets
Offshore matters carry their own penalty regime and longer time limits, and HMRC receives data on overseas accounts every year. Where nothing has been received yet, the Worldwide Disclosure Facility is the route for putting it right.
By seriousness: which route HMRC is using
| Route | Who runs it | When it is used |
|---|---|---|
| Compliance check | Any HMRC compliance team | Checking whether a return, payment or claim is correct. |
| Code of Practice 8 | Fraud Investigation Service | HMRC believes there may be a significant loss of tax but is not alleging fraud; commonly avoidance, substantial amounts or complex technical issues. |
| Code of Practice 9 | Fraud Investigation Service | HMRC suspects tax fraud and offers the Contractual Disclosure Facility, a civil route with strict deadlines. |
| Criminal investigation | HMRC’s criminal investigators | Reserved, under HMRC’s published policy, for cases needing a strong deterrent or where only a criminal sanction is appropriate. Anyone invited to an interview under caution needs a criminal defence solicitor. |
A check can move up this table. Where HMRC believes there may be a significant loss of tax, its Fraud Investigation Service can take over a check started elsewhere, which is one reason the first replies matter as much as they do.
How an investigation usually starts
Almost always with a letter. Some letters are not investigations at all: a “one to many” nudge letter invites you to review your own position and opens no formal enquiry, while a Section 9A notice formally opens one. They can look alike and call for completely different responses. Our page on what your HMRC letter is sets out the letters in turn, and the guide to nudge letters covers the certificate of tax position some of them ask for.
The other common start is a request for information. An informal request is a request; a Schedule 36 information notice is a statutory requirement, and some notices carry appeal rights. If nothing has arrived but something feels wrong, our guide to the signs HMRC is looking at your affairs covers what tends to come first.
How far back, and what it can cost
How far back HMRC can go is set by behaviour, not by the date of the letter. For income tax, capital gains tax and corporation tax, it can broadly assess four years where reasonable care was taken, six where the loss arose from carelessness, and up to twenty where it was deliberate, with longer limits for some offshore matters. VAT has its own limits: four years, or twenty where the error was deliberate, with no separate six-year limit for carelessness. Our guide to how far back HMRC can investigate sets the limits out in full.
Penalties work the same way. They are a percentage of the tax understated, the range depends on whether the inaccuracy was careless, deliberate or deliberate and concealed, and the quality of your disclosure decides where in the range a penalty lands. See the guide to HMRC penalties.
How it ends, and how to challenge it
A formal enquiry stays open until HMRC issues a closure notice, which sets out its conclusions and any amendment to the return. You can disagree, and there are routes to do so: an appeal to HMRC, a statutory review, mediation through HMRC’s alternative dispute resolution service, and the tax tribunal. Our guide to appealing an HMRC decision explains each, and the deadlines that run from the decision letter.
Outside an enquiry, HMRC can still raise a discovery assessment in defined circumstances, and penalties carry their own appeal rights.
What we do
- Identify the letter and the deadline before anything is said to HMRC
- Establish which tax, which period and which route HMRC is using
- Answer what was asked, precisely, and say when a request goes beyond the enquiry
- Keep every tax in view, so a reply on one does not open questions on another
- Put the penalty position and any mitigation to HMRC deliberately
- Take a disagreement to review, mediation or the tribunal where that is warranted
Further reading
Common questions
What is the difference between an HMRC investigation and a compliance check?
"Compliance check" is HMRC’s own term for most of its checks, from a single question about one return to a formal enquiry. "Investigation" is the word most people use for all of them. The more serious routes, Code of Practice 8 and Code of Practice 9, are run by HMRC’s Fraud Investigation Service, and criminal investigation is a separate route again.
Will HMRC tell me why it is looking at my tax affairs?
Usually not in any detail. The letter will normally name the return, tax or period concerned and say what HMRC wants, but not why it was selected or how far the officer intends to go. That is one reason to identify exactly what the letter is before replying.
Can an investigation into one tax spread to others?
It can. A check on a company return often raises questions about directors’ accounts, dividends, PAYE treatment and VAT, and a VAT check can raise direct tax questions. Answering precisely what was asked, and no more, is how the scope is kept where it belongs.
Should I telephone HMRC before taking advice?
A call to HMRC is recorded and noted on the file and cannot be withdrawn. It is generally better to establish what the letter is, and what is actually being asked, before any conversation takes place.
What does representation cost?
Representation is quoted as a fixed fee against defined stages, starting from £1,200 + VAT. Identifying the letter and confirming your deadline is done before any engagement and at no cost.
Start with the letter
Send a photo of page one on WhatsApp. We will tell you what it is, what the deadline means, and what a fixed fee would look like — within one working hour during office hours — Monday to Friday, 9am to 5pm.
We only need the letter. Please do not send bank statements, identity documents or your UTR at this stage.