Once HMRC has opened an enquiry, the way it is handled can make a significant difference to the outcome. HMRC expects you to cooperate, but you also have rights. Having an experienced adviser manage the correspondence and meetings helps keep the enquiry focused and as short as possible.
Types of enquiry
- Aspect enquiries look at one or two specific items on a return, such as a particular expense or claim.
- Full enquiries examine the whole return and the records behind it.
- Employer and VAT compliance checks review PAYE, benefits, VAT returns and records, sometimes with a visit.
- Code of Practice 8 (COP8) investigations are carried out by HMRC’s specialist teams where significant tax may be at stake, usually involving complex arrangements, but where fraud is not suspected.
- Code of Practice 9 (COP9) is used where HMRC suspects fraud. You will be offered the Contractual Disclosure Facility and have 60 days to accept and provide an outline disclosure. In return, HMRC agrees not to pursue a criminal investigation into what you disclose.
HMRC’s information powers
HMRC usually starts with an informal request for documents and information. If it does not receive what it needs, it can issue a formal information notice. You can appeal against some parts of a notice, but failing to comply without a reasonable excuse can lead to an initial penalty and further daily penalties. You do not have to attend a meeting with HMRC, but it can sometimes help resolve matters more quickly, and we will always attend with you.
Penalties
Where tax has been underpaid, penalties depend on why the error happened and whether the disclosure was prompted or unprompted:
- Careless: 0% to 30% if unprompted, 15% to 30% if prompted
- Deliberate: 20% to 70% if unprompted, 35% to 70% if prompted
- Deliberate and concealed: 30% to 100% if unprompted, 50% to 100% if prompted
Higher penalties of up to 200% can apply to offshore matters. Within each range, penalties are reduced for telling HMRC about the problem, helping to quantify it and giving access to records. Good cooperation can make a substantial difference.
Interest
Late payment interest runs from the date the tax should have been paid, currently at the Bank of England base rate plus 4%. Making a payment on account during the enquiry can stop interest building up on the amount you expect to owe.
Bringing the enquiry to a close
HMRC closes an enquiry by issuing a closure notice setting out its conclusions. If an enquiry has run on for too long without good reason, you can apply to the tribunal for a direction requiring HMRC to close it.
How we can help
- Handling all correspondence and meetings with HMRC
- Reviewing information requests and challenging excessive demands
- Preparing disclosure reports, including under COP8 and COP9
- Negotiating the tax, interest and penalties due
Next: After a Tax Investigation.
Book a confidential appointment to discuss your position.
This page is for general information only and does not constitute advice. Please contact us before acting on any of the matters discussed.