When HMRC may make an enquiry into your Tax Return
When you file your Tax Return, you are telling HMRC how much Tax your organisation is due to pay. This is known to HMRC as your organisation's 'self assessment'.
Sometimes HMRC may want to ask questions about the figures in your Tax Return form or in supporting documents such as supplementary pages, accounts and calculations. HMRC calls this kind of compliance check 'making an enquiry'
Before HMRC can make an enquiry, they must advise your organisation, in writing, that they intend to do so. HMRC calls this 'opening an enquiry'.
When HMRC opens an enquiry this doesn't necessarily mean your organisation has done anything wrong. Sometimes HMRC just needs more information to understand your figures.
What an HMRC enquiry can cover
HMRC can make an enquiry into your organisations:
• Tax Return - including accounts, tax computations and other supporting documents and calculations
• claims or elections you make separately from your return
• amendments you make to your return, claim or election
HMRC starts the enquiry process by sending you a written 'notice of enquiry'. A notice of enquiry only allows HMRC to ask questions about your organisation's Tax Return, claim or election. If HMRC wants to ask questions about your personal tax position as a director, shareholder, member or trustee, they must make a separate enquiry.
HMRC can only make one enquiry into a particular Tax Return. But if you make an amendment to your return, HMRC can then make an enquiry into that amendment too.
During a review of your Tax Return, other tax risks may come to light – for example with your VAT or PAYE responsibilities. Generally, if this happens, the HMRC Officer dealing with the review will co-ordinate any further enquiries, within the HMRC compliance checks process.
What happens when HMRC makes an enquiry
At the start of an enquiry
When HMRC sends a notice of enquiry to you, you - and your Tax agent if you've got one - will be told whether HMRC is making an enquiry into:
• the whole of your Tax Return - including y accounts, tax computations and other supporting documents
• one or more specific areas or aspects of your return
• a claim or election you've made separately from your return
At the same time HMRC will tell you:
• what information is needed
• the deadline for providing this information
• your company or organisation's rights and responsibilities
What information HMRC can request from your organisation
The information your organisation will need to supply during a compliance check will depend on what HMRC is enquiring into.
But HMRC can only ask you to provide information or documents that they need to check your organisation's Tax position.
Your tax adviser should normally be able to provide any information on which your Tax Return was based.
Possible outcomes of an HMRC enquiry
At the end of the enquiry, HMRC will normally send you a letter (called a closure notice) to tell you that the enquiry has finished. What happens then depends on whether the enquiry showed that:
• nothing is wrong
• your organisation has paid too much Tax
• your organisation hasn't paid enough Tax
If nothing is wrong
If there's nothing wrong with your Tax Return or claim, HMRC will tell you that the enquiry is over. In this case there won't be any changes to your return or claim or the amount of Tax you need to pay.
If you've paid too much Tax, from 1 April 2010, if HMRC's enquiry shows that your organisation has paid too much Tax, HMRC will:
• amend your Tax Return to reflect the lower figures
• repay the overpaid Tax to you
• pay interest on the overpayment - HMRC will normally pay your interest on the overpaid tax from the date you paid your Tax (or the normal due date for payment if later) up to the day HMRC makes the repayment
If you've paid too little Tax
If your organisation has paid too little Tax, HMRC will try to agree with you the changes and amendments needed.
From 1 April 2010, HMRC will amend your Tax Return and ask you to pay any Tax due within 30 days of the date on your closure notice. You can appeal HMRC’s amendment.
HMRC checks before you make your return
HMRC may need to check something with you before you submit your return. This may happen for example when they're following up a previous compliance check to ensure that your recordkeeping system has improved or to check the conditions set when a penalty was suspended.
This type of check is known as a 'pre-return' check. Unless you ask them to check something, HMRC must have identified a risk before they can carry out a pre-return check. This means they must think there's a potential loss of tax at stake.
A Taxwise+ Policy from Solar will allow your Accountant (your tax return agent) (Tax Advisor) to defend your position robustly and claim their fees from the policy and not from you. Your accountant (your tax return agent) can get on with the work (after processing a claim) knowing that their fees will be met in full.