HMRC enquiries: 100 questions answered
Every question directors ask after an HMRC letter arrives, answered here in full. Each answer stands alone, and each links to the guide that covers the point in depth. Nothing is hidden behind a form.
The letter itself
1. I've received a letter from HMRC about a compliance check, what do I do?
Do not ignore it. Read the letter carefully to identify which tax and years it covers, note the reply deadline, and gather the records it mentions. Contact a tax adviser or accountant promptly, especially if you are unrepresented, before responding to HMRC. Early, organised engagement reduces the risk of penalties and keeps the enquiry proportionate.
Read the full answer2. What does a compliance check letter from HMRC mean?
A compliance check is HMRC's general term for reviewing whether you have paid the right tax. It can cover Self Assessment, VAT, PAYE or Corporation Tax, and ranges from a simple query to a full enquiry. It does not automatically mean wrongdoing; HMRC checks many returns routinely as well as targeting risk indicators.
Read the full answer3. Is an HMRC compliance check the same as an investigation?
They overlap but are not identical terms. "Compliance check" is HMRC's umbrella phrase covering informal queries through to formal enquiries opened under s9A TMA 1970. A formal enquiry carries statutory information powers and a closure notice process; a lighter compliance check may resolve with a simple explanation and no formal enquiry ever being opened.
Read the full answer4. How do I know if an HMRC letter is genuine?
Check the letterhead, reference number and named officer against GOV.UK's guidance on genuine HMRC contact. Genuine letters never ask you to pay by gift card, urgent bank transfer, or click an embedded payment link. If unsure, phone HMRC's official helpline number from GOV.UK directly, rather than any number printed on the letter itself.
Read the full answer5. What is a Code of Practice 8 letter?
A Code of Practice 8 letter opens a civil investigation into suspected serious tax avoidance or complex arrangements where HMRC does not yet suspect fraud. It sits below Code of Practice 9 in severity but is still serious, involves specialist officers, and usually justifies instructing an experienced tax investigation adviser immediately upon receipt.
Read the full answer6. What is a Schedule 36 information notice?
A Schedule 36 information notice is a formal statutory demand under Schedule 36 FA 2008 requiring you to provide specified documents or information HMRC reasonably needs to check your tax position. Failure to comply on time can trigger daily penalties, and in some cases you can appeal the notice to the tribunal.
Read the full answer7. What does “check of your Self Assessment tax return” mean?
It means HMRC has selected your Self Assessment return, or a specific entry on it, for review before accepting the figures as final. This can be a full enquiry into the whole return or a narrower "aspect" enquiry focused on one item, such as expenses, income sources, or a claimed relief.
Read the full answer8. How long do I have to reply to an HMRC enquiry letter?
There is no single fixed deadline for every letter, but any stated response date should be treated seriously. Formal information notices under Schedule 36 FA 2008 commonly allow a set minimum period, often around 30 days, to produce documents. Missing it risks penalties, so respond or request an extension before that date passes.
Read the full answer9. Can I ask HMRC for more time to respond?
Yes, you can ask HMRC for more time, and reasonable requests are often granted, particularly where you are gathering records or instructing an adviser. Contact the officer named on the letter before the deadline expires, explain why more time is needed, and get any extension confirmed in writing to avoid later dispute.
Read the full answer10. What happens if I ignore an HMRC compliance check letter?
Ignoring it rarely makes an enquiry go away and usually makes things worse. HMRC can issue formal Schedule 36 FA 2008 notices, raise penalties for non-compliance, and ultimately make a discovery or best-judgement assessment based on limited information, which is often higher than the true liability would have been with full cooperation.
Read the full answer11. Do I have to reply to an HMRC nudge letter?
You are not legally compelled to reply to a nudge letter itself, since it is not a formal information notice. However, ignoring credible evidence that HMRC holds data about undeclared income is risky, because it can later be treated as prompted rather than unprompted disclosure, increasing any penalty if HMRC investigates further.
Read the full answer12. Why has HMRC opened an enquiry into my tax return?
HMRC opens enquiries under s9A TMA 1970 for many reasons: figures that look inconsistent with data it already holds, a pattern that fits a known risk profile, a random selection, or a specific tip-off. The opening letter does not have to explain the exact trigger, only that an enquiry is being made.
Read the full answer13. Is my HMRC enquiry random or targeted?
It could be either, and HMRC is not required to tell you which. Some enquiries are opened through risk-based data matching against third-party information, such as bank interest, property sales or online marketplace data. Others form part of a small random sample used to test overall compliance levels across taxpayers generally.
Read the full answer14. How does HMRC select people for a tax investigation, and what triggers one?
HMRC uses risk-based software (Connect) that cross-matches your return against data from banks, land registries, online marketplaces, and other government sources, alongside a small element of random selection. Common triggers include income inconsistent with lifestyle, repeated losses, large or unusual expense claims, late filing patterns, and tip-offs or industry-specific campaigns.
Read the full answerProcess and rights
16. How long does an HMRC enquiry take?
There is no fixed length; straightforward enquiries can close within months, while complex or contested cases involving Code of Practice 8 or offshore matters can run for a year or more. Progress depends on how quickly information is provided, how complicated the issues are, and whether HMRC and you reach agreement on the figures.
Read the full answer17. What are my rights during an HMRC compliance check?
You have the right to know which tax and years are under review, to be represented by an adviser, to be given reasonable time to respond, and to appeal certain HMRC decisions, including information notices and closure notice applications. HMRC must act within its statutory powers and cannot demand more than it is entitled to.
Read the full answer18. Can I refuse to give HMRC information?
You can refuse to provide information HMRC has not formally demanded, and you can challenge a formal Schedule 36 FA 2008 notice by appealing to the tribunal if you believe it is unreasonable or asks for irrelevant material. However, refusing a valid, unappealed notice risks daily penalties and does not stop the enquiry.
Read the full answer19. Can HMRC ask my bank for my statements, or look at my personal bank account?
Yes, HMRC can request bank statements, including from a personal account, using Schedule 36 FA 2008 powers where it reasonably needs the information to check your tax position. It usually asks you first rather than the bank directly, and a request for third-party information from the bank itself needs additional safeguards or approval.
Read the full answer21. Does HMRC have to tell me why they're investigating me?
HMRC does not have to give detailed reasons for opening an enquiry under s9A TMA 1970, and the opening letter often states only that your return is being checked. You are entitled to know which tax and periods are covered, but the specific trigger or risk indicator is not something HMRC is required to disclose.
Read the full answer22. Can I appeal an HMRC information notice?
Yes, in many cases you can appeal a Schedule 36 FA 2008 information notice to the First-tier Tribunal, arguing the information is not reasonably required or the notice is otherwise unreasonable. Some notices, particularly those already approved by the tribunal, cannot be appealed, so check the notice type before deciding how to respond.
Read the full answer23. Can I record an HMRC meeting?
There is no automatic right to record an HMRC meeting, and HMRC generally does not permit covert recording. You can ask HMRC in advance for permission to record openly, and requests are sometimes agreed with notice. Many advisers instead recommend a written note or a follow-up letter summarising what was discussed and agreed.
Read the full answer24. Do I have to attend an HMRC meeting in person?
No, meetings with HMRC are usually voluntary rather than compulsory, and you can decline to attend in person. HMRC may instead ask for information in writing under Schedule 36 FA 2008, or you can propose a phone or video meeting instead. Declining a meeting does not stop the enquiry, only that particular meeting format.
Read the full answer25. Should I meet HMRC without an accountant?
It is generally not advisable to meet HMRC alone, especially in a formal enquiry or Code of Practice 8 investigation. An accountant or tax investigation specialist can manage questioning, prevent inadvertent admissions, and ensure answers are accurate and complete. Even a routine meeting benefits from experienced representation being present throughout.
Read the full answer26. Can HMRC visit my business premises unannounced?
HMRC officers do not normally have a right to enter business premises without notice or your consent, except in specific circumstances involving approved inspection powers or, rarely, a warrant. Most premises visits are pre-arranged under Schedule 36 FA 2008 inspection powers. You can ask to see the officer's identification and legal authority before allowing entry.
Read the full answer27. How far back can HMRC investigate, and can HMRC go back 20 years?
How far back HMRC can go depends on your behaviour: broadly four years for genuine mistakes despite reasonable care, six years for careless errors, and up to twenty years where HMRC establishes deliberate conduct, under the time limits in TMA 1970 and related legislation. Offshore matters can carry an extended separate time limit.
Read the full answer29. What is a discovery assessment?
A discovery assessment lets HMRC raise extra tax outside the normal enquiry window when it later discovers income or gains were not properly assessed, typically under s29 TMA 1970. It usually requires HMRC to show the shortfall was not something a competent officer should already have identified from information provided at the time.
Read the full answer30. How do I close an HMRC enquiry?
An enquiry under s9A TMA 1970 normally ends when HMRC issues a closure notice stating its conclusions and any amendment to your return. If HMRC is taking too long without good reason, you or your adviser can apply to the tribunal under s28A TMA 1970 for a direction requiring HMRC to close it.
Read the full answer31. What is a closure notice from HMRC?
A closure notice is the formal document under s28A TMA 1970 that ends an enquiry, stating HMRC's conclusions and confirming any amendment needed to your tax return or that no amendment is required. It also starts the clock on your right to appeal, usually within thirty days, if you disagree with the outcome.
Read the full answer32. Can I apply to the tribunal to close an HMRC enquiry?
Yes, if HMRC has not closed a lengthy enquiry and will not commit to a timescale, you can apply to the First-tier Tribunal for a direction requiring a closure notice within a specified period. The tribunal will consider whether HMRC has reasonable grounds for the continued delay before making that direction.
Read the full answerPenalties and outcomes
33. What penalties can HMRC charge after an enquiry?
After an enquiry, HMRC can charge tax-geared penalties under Schedule 24 FA 2007 for inaccuracies in returns, and under Schedule 41 FA 2008 for failures to notify chargeability. The amount depends on behaviour — careless, deliberate, or deliberate and concealed — and whether disclosure was prompted or unprompted, alongside the underlying tax and interest.
Read the full answer34. How are HMRC penalties calculated?
Penalties are calculated as a percentage of the tax HMRC has lost, called the potential lost revenue, under Schedule 24 FA 2007. The percentage band depends on whether the error was careless, deliberate, or deliberate and concealed, and whether you told HMRC before or after being caught, with reductions for full cooperation.
Read the full answer35. What is the difference between careless and deliberate behaviour?
Careless behaviour means you failed to take reasonable care, such as a genuine arithmetic slip or overlooked income. Deliberate behaviour means you knew the return was wrong when you submitted it. The distinction matters hugely because deliberate cases under Schedule 24 FA 2007 attract far higher penalty ranges and much longer assessment time limits.
Read the full answer36. Can I reduce HMRC penalties by cooperating?
Yes, cooperating meaningfully reduces penalties under Schedule 24 FA 2007. Reductions are given for telling HMRC promptly, giving full access to records, and helping quantify the correct liability quickly. The biggest reductions go to unprompted, early and complete disclosure, so acting fast and transparently once an issue is identified matters greatly.
Read the full answer37. What is unprompted vs prompted disclosure?
Unprompted disclosure means you tell HMRC about an error before you have any reason to believe it is about to be discovered, and it attracts much lower penalty ranges. Prompted disclosure happens after you become aware HMRC is checking or about to check, and carries higher minimum penalties under Schedule 24 FA 2007.
Read the full answer38. Will HMRC prosecute me for underpaid tax?
Prosecution is reserved for serious deliberate fraud, especially repeated or large-scale deception, not genuine mistakes or careless errors. Most cases are dealt with civilly through penalties under Schedule 24 FA 2007 or Schedule 41 FA 2008. Code of Practice 9 applies where fraud is suspected but criminal action is not pursued.
Read the full answer39. Will I go to prison for not declaring income?
Prison is rare and reserved for the most serious, deliberate and often large-scale fraud cases, usually pursued through criminal prosecution rather than routine civil investigation. Most undeclared income cases are resolved through disclosure facilities, civil penalties under Schedule 24 FA 2007, and repayment of tax with interest, without any criminal charge being brought.
Read the full answer40. What is HMRC's publishing deliberate defaulters list?
HMRC can publish the names, addresses and details of deliberate defaulters where the tax lost exceeds a statutory threshold and the taxpayer did not make a full, unprompted disclosure. Publication follows serious penalty cases involving deliberate behaviour, stays online for a set period, and is a further consequence beyond the financial penalty itself.
Read the full answer41. Can I pay HMRC in instalments after an enquiry?
Yes, HMRC can agree instalment arrangements, often called Time to Pay, for tax and penalties owed after an enquiry, provided you can show you genuinely cannot pay the full amount at once. Interest continues to accrue on the outstanding balance throughout the arrangement, and missed instalments can cause HMRC to demand the full remaining sum.
Read the full answer42. How do I set up a time to pay arrangement with HMRC?
Contact HMRC's payment support service, or discuss it through your adviser, before the payment deadline where possible. You will need to explain your income, outgoings and why you cannot pay in full, and propose realistic monthly instalments. HMRC assesses affordability case by case and can refuse or later cancel an arrangement that is not maintained.
Read the full answer43. How much interest does HMRC charge on late tax?
HMRC charges late payment interest from the original due date until payment, set by reference to the Bank of England base rate, so it moves as that rate changes rather than staying fixed. Interest applies whether or not a penalty is also charged, and keeps accruing throughout any Time to Pay arrangement you agree.
Read the full answer44. Can HMRC take money directly from my bank account?
Yes, in limited circumstances HMRC can use Direct Recovery of Debts powers to take money straight from your bank or building society account for undisputed tax debts, after specific safeguards and notice periods. This is used sparingly and only where other recovery attempts and required minimum balance protections have been properly followed first.
Read the full answerVAT
45. Why is HMRC checking my VAT return?
HMRC checks VAT returns for many reasons: figures inconsistent with previous returns, an unusually large repayment claim, sector-specific risk indicators, or routine assurance work under VATA 1994. It does not necessarily mean anything is wrong; many checks simply verify that input tax claims and output tax figures are correctly supported by records.
Read the full answer46. What happens during a VAT inspection?
During a VAT inspection, an officer typically reviews your VAT account, sales and purchase invoices, bank records and contracts, and may visit your premises or request documents remotely. They check that output tax has been correctly declared and input tax properly claimed under VATA 1994, and may raise queries or a formal assessment afterwards.
Read the full answer47. What records does HMRC want for a VAT check?
HMRC typically wants sales and purchase invoices, the VAT account, bank statements, till records, contracts, and evidence supporting any zero-rated, exempt or reduced-rate treatment claimed. Keeping organised digital records under Making Tax Digital requirements makes responding faster and reduces the risk of an unfavourable assessment based on incomplete information.
Read the full answer48. Why has HMRC delayed my VAT refund, and how long does verification take?
Delays commonly arise because HMRC is verifying unusually large claims, checking supporting invoices, or cross-referencing your business against known VAT fraud risk indicators under VATA 1994. Verification can take weeks rather than days, particularly for new registrations, first repayment claims, or where documentation supplied initially was incomplete or inconsistent with the return.
Read the full answer50. Why has HMRC refused my VAT registration?
HMRC commonly refuses VAT registration where it doubts the business is genuinely trading, cannot verify your identity or business address, suspects the application is linked to fraud, or lacks sufficient evidence of an intention to make taxable supplies. You can request a review or appeal the decision if you believe it is wrong.
Read the full answer51. What is a VAT pre-registration verification check?
A VAT pre-registration verification check happens when HMRC pauses a new application under VATA 1994 Sch 1 before issuing a number, usually to confirm identity, trading intentions and evidence of taxable supplies. Respond promptly with invoices, contracts or a business plan. Delays are common; escalate through HMRC's complaints route if it drags on unreasonably.
Read the full answer52. What happens if I registered for VAT late?
Registering late means you owe VAT on sales from when you should have registered, not just from the date you applied. HMRC can also charge a penalty for late notification under Schedule 41 FA 2008. You should register as soon as you realise, calculate the backdated VAT, and disclose voluntarily to limit penalty exposure.
Read the full answer53. What is the penalty for late VAT registration?
The penalty for late VAT registration is a percentage of the VAT due for the period you should have been registered, set within HMRC's Schedule 41 FA 2008 ranges depending on how late and how the failure came to light. Telling HMRC before they find out reduces the penalty considerably compared with a prompted disclosure.
Read the full answer54. Can HMRC backdate my VAT registration?
Yes, HMRC can backdate your VAT registration to the date your taxable turnover first exceeded the threshold under VATA 1994 Sch 1, even years later. This creates a VAT liability on past sales you may not have charged customers for. Get advice quickly, since output tax calculations and penalty mitigation both depend on accurate figures.
Read the full answer55. HMRC says I've split my business to avoid VAT, what now?
HMRC alleges 'disaggregation' when it thinks you split one business into separate entities to keep each below the VAT registration threshold, targeted by VATA 1994 Sch 1 anti-avoidance provisions. Challenge this by showing genuine commercial separation — different customers, staff, premises or purpose. Evidence of independent decision-making is central to any defence.
Read the full answer56. What is a VAT assessment and can I appeal it?
A VAT assessment is HMRC's estimate of tax owed when it believes your returns are wrong or incomplete, issued under VATA 1994 Sch 11 powers. You can appeal within the statutory window, first through internal review, then to the tax tribunal. Act quickly and gather records showing the assessment overstates what you owe.
Read the full answer57. Why is HMRC questioning my Flat Rate Scheme?
HMRC questions Flat Rate Scheme use when your trade sector, cost base or turnover suggests the scheme no longer suits you, or you've claimed a lower rate than your correct category. It commonly checks the 'limited cost business' rules. Review your sector classification and expenditure evidence before responding to any information request.
Read the full answer58. HMRC is questioning my input tax claims, what do I do?
When HMRC challenges input tax, it wants evidence the purchase was for business use, properly invoiced, and not connected to fraud further up the supply chain under VATA 1994 Sch 11 record-keeping rules. Supply valid VAT invoices, contracts and proof of payment. Claims linked to missing traders face far stricter scrutiny.
Read the full answerCorporation Tax and limited companies
59. Why has HMRC opened an enquiry into my company tax return?
HMRC usually opens a corporation tax enquiry under Para 24 Sch 18 FA 1998 because figures look inconsistent, a risk indicator was flagged, or a disclosure elsewhere triggered a wider check. It doesn't always mean wrongdoing is suspected. Read the letter carefully to see the stated scope, then gather the accounting records it names.
Read the full answer60. What does HMRC look at in a corporation tax enquiry?
A corporation tax enquiry typically examines turnover completeness, expense deductibility, director's loan accounts, related-party transactions, capital allowances and any reliefs claimed such as R&D. HMRC uses its Para 24 Sch 18 FA 1998 powers to request underlying records, not just the return. The scope stated in the opening letter shows what's under review.
Read the full answer61. HMRC is asking about my director's loan account, what does that mean?
HMRC questions a director's loan account when it sees money owed to or from the company that hasn't been correctly taxed or disclosed, often looking for undeclared benefits or a s455 CTA 2010 charge. Provide a full breakdown of transactions, dates and repayments. Untidy loan accounts are a common enquiry trigger, so accurate ledgers matter.
Read the full answer62. What is a section 455 tax charge?
A section 455 tax charge under s455 CTA 2010 applies when a close company lends money to a director or shareholder and the loan remains outstanding nine months after the accounting period ends. The company pays the charge to HMRC, repayable once the loan is cleared or written off, subject to specific timing rules.
Read the full answer63. Can HMRC challenge my dividends?
Yes, HMRC can challenge dividends if company records show insufficient distributable reserves, poor documentation of board decisions, or payments disguising what is really salary or a loan. Illegal dividends can be reclassified, sometimes triggering a s455 CTA 2010 charge instead. Keep signed board minutes, dividend vouchers and management accounts showing profits existed at the time.
Read the full answer64. What happens if I took dividends with no profits?
Taking dividends without available profits makes them unlawful under company law, and HMRC will often treat the payment as a director's loan instead, potentially triggering a s455 CTA 2010 charge or income tax under the loan-to-participator rules. You may need to repay the company or reclassify it, with accountancy advice on the treatment.
Read the full answer65. HMRC says my expenses aren't allowable, what can I do?
If HMRC says expenses aren't allowable, ask exactly which items it's challenging and under what rule, since 'wholly and exclusively' for business purposes is the core test. Provide invoices, contracts and an explanation of business purpose for each item. Where genuinely mixed personal and business use exists, a reasonable apportionment may still be accepted.
Read the full answer66. Can HMRC investigate a dormant company?
Yes, HMRC can open an enquiry into a dormant company, particularly if it suspects trading activity was ongoing despite dormant filings, or if historic returns understated income before dormancy began. Filed accounts and Companies House records don't prevent scrutiny. Keep evidence showing genuinely no trading occurred if you're asked to justify the dormant status.
Read the full answer67. Can HMRC investigate a company that has been closed, and does closing it stop an enquiry?
HMRC can still investigate a company after it's dissolved, using restoration powers to bring it back onto the register specifically to pursue unpaid tax or open an enquiry. Directors shouldn't assume striking off ends liability. Where deliberate wrongdoing is suspected, HMRC has restored companies years later, so proper record retention matters even after closure.
Read the full answer68. Can HMRC make a director personally liable for company tax?
Yes, in limited circumstances a director can become personally liable for company tax, particularly where HMRC issues a personal liability notice under s121C SSAA 1992 for certain National Insurance failures, or where fraud, wrongful trading or a transfer of assets to avoid tax is established. Ordinary trading losses don't usually create personal liability.
Read the full answer69. What is a personal liability notice?
A personal liability notice is issued under s121C SSAA 1992, making a company officer personally responsible for unpaid National Insurance contributions where HMRC finds fraud or neglect by that individual. It shifts the debt from the company to you personally. You can appeal within the statutory time limit if you dispute the finding.
Read the full answerR&D
71. Why has HMRC rejected my R&D tax credit claim?
HMRC usually rejects an R&D claim because the described work doesn't meet the scientific or technological uncertainty test, evidence of the advance is thin, or costs claimed don't match qualifying categories under Part 13 CTA 2009. Request the specific reasons in writing, then prepare a technical narrative and cost breakdown addressing each point raised directly.
Read the full answer72. What is an HMRC R&D compliance check?
An HMRC R&D compliance check examines whether your claimed activities meet the statutory definition of research and development under Part 13 CTA 2009, and whether the costs claimed are genuinely qualifying expenditure. HMRC increasingly opens these before paying out, not just afterwards. Expect detailed technical questions about the project's uncertainty and the competent professional's assessment.
Read the full answer73. How do I respond to an HMRC R&D enquiry letter?
Respond to an HMRC R&D enquiry letter by first identifying exactly which claim years and cost categories are under review. Prepare a clear technical narrative explaining the scientific or technological advance sought under Part 13 CTA 2009, supported by contemporaneous project records, timesheets and cost evidence. Don't let the statutory deadline pass without a reply.
Read the full answer74. What evidence does HMRC want for an R&D claim?
HMRC wants contemporaneous evidence for an R&D claim: project plans, technical notes describing the uncertainty tackled, staff time records, subcontractor and consumable invoices, and a competent professional's assessment of the advance sought under Part 13 CTA 2009. Evidence created after the event, or written generically, carries far less weight than records made at the time.
Read the full answer75. Can HMRC claw back R&D tax credits already paid?
Yes, HMRC can claw back R&D tax credits already paid if a later compliance check finds the claim didn't meet the qualifying conditions in Part 13 CTA 2009. It can raise a discovery assessment and add penalties under Schedule 24 FA 2007 for careless or deliberate errors. Repayment plus interest is common in successful challenges.
Read the full answer76. What penalties apply to an incorrect R&D claim?
Penalties for an incorrect R&D claim follow the same Schedule 24 FA 2007 framework as other tax errors, ranging by behaviour from no penalty for reasonable care through higher percentages for careless or deliberate inaccuracy. HMRC also considers whether your agent gave reasonable advice, affecting whether the penalty falls on you or the adviser.
Read the full answer77. My R&D adviser has disappeared, what do I do?
If your R&D adviser has disappeared, you remain responsible for the accuracy of the claim submitted in your company's name under Part 13 CTA 2009. Gather whatever project records and correspondence you still hold, then instruct a new adviser urgently to assess the claim's strength before HMRC opens or continues a compliance check into it.
Read the full answerCIS and construction
78. Why is HMRC checking my CIS refund?
HMRC checks CIS refunds under the FA 2004 Chapter 3 scheme to verify that deductions claimed actually match deductions your contractors made and reported, and that your turnover and costs are consistent with the trade declared. Mismatches between your figures and contractor returns are the most common reason a refund gets held for review.
Read the full answer79. How long does a CIS refund take when HMRC is checking it?
A CIS refund under enquiry can take considerably longer than a routine claim, often several months, because HMRC cross-checks contractor deduction statements, verifies subcontractor status and may request full business records under FA 2004 Chapter 3. Respond quickly to information requests, since incomplete replies are the main cause of extended delay.
Read the full answer80. HMRC says my subcontractors are employees, what happens?
If HMRC says your subcontractors are really employees, it's applying employment status tests under Chapter 10 Part 2 ITEPA 2003 or general case law, looking at control, substitution and mutuality of obligation. Consequences can include backdated PAYE, National Insurance and penalties. Review each individual's working arrangements against the status tests before responding.
Read the full answer81. What is a CIS compliance review?
A CIS compliance review checks that you're correctly verifying subcontractors, applying the right deduction rate, filing monthly returns on time and keeping accurate records under FA 2004 Chapter 3. HMRC may visit or request records covering several years. Gather verification confirmations, deduction statements and monthly returns before the review meeting takes place.
Read the full answer82. What is the domestic reverse charge check?
The domestic reverse charge check examines whether VAT-registered construction businesses correctly applied the reverse charge on qualifying supplies between contractors and subcontractors, shifting VAT accounting to the customer rather than the supplier. HMRC looks for invoices wrongly charging VAT, or reverse charge treatment applied where it shouldn't have been used, under the VAT construction rules.
Read the full answerEmployment status and IR35
83. What is an IR35 compliance check?
An IR35 compliance check examines whether a contractor working through a personal service company should really be taxed as an employee under Chapter 10 Part 2 ITEPA 2003 for the end client, or Chapter 8 where the older rules still apply. HMRC reviews contracts and actual working practices, since the two don't always match.
Read the full answer84. How do I respond to an HMRC off-payroll working letter?
Respond to an off-payroll working letter by gathering the actual contract, any status determination statement, and evidence of how the work was really carried out day to day. HMRC compares the written terms against practice under Chapter 10 Part 2 ITEPA 2003. Don't ignore the deadline; a considered written response with evidence carries real weight.
Read the full answer85. What happens if HMRC decides I'm inside IR35?
If HMRC decides you're inside IR35, the fee-payer or deemed employer becomes liable for PAYE and National Insurance on payments made, potentially backdated across several years under Chapter 10 Part 2 ITEPA 2003. You can appeal the determination through HMRC's review process and then the tax tribunal if you disagree with the status conclusion.
Read the full answer86. How far back can HMRC go on IR35?
HMRC can generally go back up to the careless or deliberate behaviour time limits on IR35, meaning several years for genuine errors and considerably longer where it alleges deliberate non-compliance under Chapter 10 or Chapter 8 Part 2 ITEPA 2003. The exact period depends on the behaviour found, not a single fixed number.
Read the full answer87. What is an HMRC employer compliance review?
An HMRC employer compliance review checks PAYE, National Insurance, benefits in kind, expenses and status decisions across your workforce, often spanning several tax years. It can cover Chapter 8 or Chapter 10 Part 2 ITEPA 2003 issues alongside routine payroll accuracy. Expect requests for payroll records, contracts and expense policies before any meeting.
Read the full answerProperty and undisclosed income
88. What is the Let Property Campaign?
The Let Property Campaign is HMRC's route for landlords to voluntarily disclose undeclared rental income before HMRC contacts them first, usually resulting in lower penalties than if HMRC discovers the omission itself. You calculate the tax owed across the relevant years, submit a disclosure, then pay what's due plus interest and any penalty applied.
Read the full answer89. I haven't declared my rental income, what should I do?
If you haven't declared rental income, use the Let Property Campaign to disclose voluntarily rather than waiting for HMRC to find it. Coming forward unprompted attracts a lower penalty under Schedule 24 FA 2007 than a prompted disclosure after HMRC writes to you. Calculate the tax owed for each affected year before submitting the disclosure.
Read the full answer90. How does HMRC know about my rental property?
HMRC learns about rental property through Land Registry data, mortgage lender information, letting agent reports, tenancy deposit scheme records, Making Tax Digital data and its own information-sharing agreements. It cross-references these sources against Self Assessment returns automatically. Assume any income-producing property is visible to HMRC and disclose proactively rather than waiting to be found.
Read the full answer91. What penalties apply for undeclared rental income?
Penalties for undeclared rental income follow the Schedule 24 FA 2007 framework, ranging from no penalty for a reasonable excuse promptly corrected, through higher percentages for careless or deliberate behaviour. Coming forward unprompted through the Let Property Campaign keeps you at the lower end of the applicable range compared with HMRC discovering it first.
Read the full answer92. How do I make a voluntary disclosure to HMRC?
Make a voluntary disclosure by identifying which years and income sources are affected, then using the correct HMRC route: the Digital Disclosure Service for most onshore and offshore matters, or a dedicated campaign such as Let Property where it applies. Calculate the tax, interest and likely penalty, then submit a full and accurate disclosure.
Read the full answer93. What is the Digital Disclosure Service?
The Digital Disclosure Service is HMRC's online platform for voluntarily disclosing undeclared income or gains, covering most onshore situations and general offshore matters outside a specific named campaign. You register, then submit a structured disclosure with calculations for each affected year. Unprompted use generally results in materially lower penalties than waiting for HMRC.
Read the full answer94. What is the Worldwide Disclosure Facility?
The Worldwide Disclosure Facility is HMRC's route specifically for disclosing offshore income, gains or assets not previously declared, reflecting the extended time limits and higher penalty ranges that can apply to offshore matters. You register online, then submit calculations covering each affected year. Specialist advice is worth taking given the complexity of offshore rules.
Read the full answer95. HMRC has written about my offshore income, what do I do?
If HMRC writes about offshore income, don't ignore it; offshore matters carry extended time limits and higher penalty ranges under Schedule 24 FA 2007 than purely domestic errors. Review the years and accounts referenced, then consider disclosing through the Worldwide Disclosure Facility before HMRC opens a formal enquiry, since unprompted disclosure reduces the penalty considerably.
Read the full answer96. I sold a property and didn't report it, what happens?
If you sold a property and didn't report a taxable gain, disclose it as soon as possible rather than wait to be caught. UK residential property disposals normally have a short statutory reporting window after completion, and missing it triggers penalties and interest on top of the Capital Gains Tax itself. Calculate the gain and disclose promptly.
Read the full answer97. HMRC sent me a letter about my crypto, what should I do?
If HMRC writes about your crypto, it likely has data from an exchange or its own information-sharing arrangements showing disposals you haven't declared. Gather transaction records, calculate any Capital Gains Tax or income tax due, and consider disclosing through the Digital Disclosure Service before HMRC formally opens an enquiry, since unprompted disclosure reduces penalty exposure.
Read the full answer98. HMRC sent me a letter about eBay/Etsy/Vinted income, what now?
A letter about eBay, Etsy or Vinted income usually follows the platform reporting rules, under which online marketplaces now share seller data with HMRC. It doesn't automatically mean you owe tax, since occasional selling of personal items is usually not taxable. Work out whether your activity amounts to trading, and disclose any undeclared profit promptly.
Read the full answer99. What is HMRC's One to Many letter campaign?
HMRC's One to Many letter campaign sends templated letters to groups of taxpayers flagged by a shared data pattern, such as an income type or platform, without opening a formal enquiry into each one individually. It's a nudge to prompt voluntary disclosure. Review your own position carefully and correct errors before HMRC escalates to a full check.
Read the full answer100. Should I get an accountant or tax investigation specialist for an HMRC enquiry?
A general accountant is usually enough for routine bookkeeping queries or a straightforward information request. Once HMRC alleges deliberate behaviour, opens a Code of Practice 8 or 9 case, or penalties and personal liability are in play, specialist investigation experience matters more. This practice is regulated by ICAEW, ACCA and AAT, so check any adviser's standing first.
Read the full answerWhy directors bring their HMRC letter to us
- Regulated by ICAEW, ACCA & AAT
- Team of qualified accountants
- Free tax investigation insurance with Growth plans
- Dedicated accounts manager*
- Trusted by thousands of UK businesses
- Never miss any deadlines — guaranteed
- Free telephone and email support
- Fully insured London based firm
*Included on the Growth plan — see our fees.