If you’ve received an HMRC compliance check letter, don’t panic – but act quickly. The Lindsay Henson team provides expert tax compliance assistance to help self-employed people, landlords, and small businesses respond quickly, avoid costly mistakes, and protect their position.
Section 9A of the Taxes Management Act 1970 gives HM Revenue & Customs the right to investigate any tax return giving HM Revenue & Customs the right to carry out an HMRC compliance check or open a full tax compliance investigation into your return. This right applies to the original tax return, and to any subsequent amendment to the return made by the taxpayer. Largely these enquiries will relate to the self employed and often landlords.
Worried About an HMRC Compliance Check or Self-Assessment Enquiry?
Why Acting Quickly Matters:
If you’ve received a letter or been notified about an HMRC compliance check, it’s vital to act quickly. The Lindsay Henson team offers clear advice and support to deal with:
- Tax compliance assistance for self-employed and landlords
- Compliance check penalties and how to avoid them
- Handling complex HMRC tax compliance investigations
Whilst you will be repaid if you’ve paid too much, more likely you will be asked to pay additional tax if you owe more, and you’ll have to pay interest from the date the tax was due.
Call 07879 464 577 now for free, confidential advice on your compliance check.
What is an HMRC Compliance Check?
An HMRC compliance check is a review carried out by HM Revenue & Customs to make sure your tax return is correct. It can cover income, expenses, and other details to confirm you’ve paid the right amount of tax.
Types of Compliance Checks You Might Face
There are various options open to HMRC when it suspects that tax has not been paid or has been underpaid. An initial response to a submitted tax return might also trigger a formal HMRC tax compliance check. These options include:
- Carrying out a compliance investigation — previously known as a tax investigation — involves HMRC reviewing your records in detail. If you’ve received an HMRC compliance check letter, take this seriously and get professional advice immediately. This is a formal enquiry into a tax return under Section 9A within strict time limits whereby a letter will be issued to you.
- Issuing a ‘discovery assessment’ where HMRC has discovered that a return of corporation tax, income tax or CGT is wrong, but the enquiry time limits for enquiry into that return have passed, or an enquiry has already been made but is now closed
- Issuing a determination (an estimated assessment) if you have failed to file a return for corporation tax, income tax or capital gains tax
What Happens During a Compliance Check
A full investigation into a return will normally include an examination of all business records for the year of enquiry. They may also request a meeting with you, but this is never a legal requirement (see my section under meetings and interviews with HMRC). Following examination of the records if errors or omissions are discovered by HMRC, they have the right to make earlier years’ assessments to the best of their judgement. A good, experienced advisor will negotiate the best settlement for you and bring forward all factors in your favour limiting the years and the tax liabilities as far as possible.
Expert Guidance to Protect Your Position
Lindsay recommends that you never pick up the phone and call HMRC as a result of receiving an enquiry notice. You should speak to a specialist or your accountant first. HMRC are expert asking seemingly innocuous questions on the telephone, but all your responses will be noted in writing. Once recorded, they are very hard to retract or change later. They are very often of the ‘Mastermind school of taxation‘ where your first answer is the only one, they can accept. A good, experienced adviser will negotiate the best possible settlement for you. They’ll also highlight any factors in your favour to reduce the tax or liabilities as much as possible.
Generally self-assessment enquiries/compliance checks can take 6 to 12 months to complete and HMRC are notoriously slow to respond and are not keen on taking shortcuts.
At the conclusion to the enquiry HMRC will write to tell you the results of the check.
You are also likely to have to pay a penalty. HMRC will look at:
- the reasons why you underpaid or overclaimed the tax
- whether you told HMRC as soon as you could
- how helpful you’ve been during the check
Possible Outcomes and Settlements
Settlement can be by a contract with HMRC. You will sign a letter of offer offering the full lump sum incorporating the tax and national insurance contributions, interest, and a penalty charge. In return HMRC will issue a letter of acceptance and this exchange of letters comprises a contract between you and binding both sides by its terms.
Contract settlement can be paid over a time period, but normally this is limited to a two-year instalment arrangement. This will also carry ‘forward interest‘ so can be somewhat punitive.
These days many settlements are concluded formally by assessment. HMRC will issue tax calculations and assessments for each individual tax year. The interest will be calculated at their end and appear on your self-assessment statement.
A separate penalty determination will be issued and eventually this will show up also on your self-assessment statement. In these circumstances it is up to you to make full payment or contact debt management unit yourself and arrange for an instalment plan. Interest will continue to accrue on your self-assessment statement until the sum is paid in full.
