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Tax Enquiries

A tax enquiry or check is triggered when HMRC uses its statutory powers to look at your tax return and/or the accounts for your business in order to satisfy themselves that they are correct.

Most tax returns and business accounts that are sent to HMRC are simply filed into the system so that the amounts of tax that you owe can be calculated and the Statements of Account can be sent out. Most tax returns are never actually looked at or checked for accuracy. However, a small percentage of these tax returns will be investigated further by HMRC. There are different types of investigations/reviews:

In certain circumstances, HMRC can go back as far as 20 years.

These are:

Under no circumstances can HMRC go back beyond 20 years.

Compliance Check

Compliance checks are becoming a more important part of HMRC’s enforcement policy. They involve visiting a business (which HMRC have the legal power to do, if necessary without your consent) to make sure that proper books and records are being kept, or that PAYE is being operated properly on the wages paid to employees. Other examples are checks on VAT or in the case of the building trade, the Construction Industry Scheme.

Aspect Enquiry

The commonest type of enquiry is an ’aspect enquiry’, where the inspector simply asks one or two questions to satisfy himself or herself that a particular point in the tax return is correct; a common example is a check that a capital gain in your tax return has been correctly calculated. These are not usually particularly serious and are usually dealt with in a matter of weeks. However, in some cases they can be very time-consuming, particularly when complex legal points are involved and, very occasionally, they can expand into a ’full enquiry’.

Full Enquiry

A full enquiry is when HMRC goes right through your tax return to make sure that the personal information and business accounts that you have filed are correct. This can be a very thorough and stressful process. Full enquiries used to be the main type of work done by tax inspectors, but these days they are less common, with aspect enquiries representing the majority of HMRC enquiries.