HMRC tax investigations and enquiries
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If HMRC has written to you, the single most useful thing you can do is not reply yet.
Most of the serious damage in a tax enquiry is done in the first response, by someone trying to be helpful. Volunteering information nobody asked for. Answering a question that was fishing. Explaining something that was never in question and opening a door that was closed.
We take the letter, work out what HMRC is actually asking and why, and deal with them on your behalf. You do not have to speak to them.
What the letter usually means
HMRC contact comes in several forms, and they are not equally serious. Knowing which one you have is the first step.
A nudge letter. Not an enquiry at all. HMRC has data suggesting something may be wrong, often from overseas banks, online platforms or the Land Registry, and is inviting you to check. Ignoring it is a mistake. So is replying without thinking, because a nudge letter that is answered badly becomes an enquiry.
An aspect enquiry. HMRC is asking about one specific thing on a return. Often narrow and resolvable.
A full enquiry. HMRC is examining the whole return. More serious, more intrusive, and it can widen.
A discovery assessment. HMRC believes tax was under-assessed in an earlier year and is reopening it. Time limits matter enormously here.
COP8. Used where HMRC suspects significant tax has been avoided, but not fraud.
COP9 (the Contractual Disclosure Facility). HMRC suspects deliberate, serious tax fraud. This one is genuinely serious, there is a strict 60-day window to respond, and you should not take a single step without specialist representation. If your letter mentions Code of Practice 9, call us today.
How far back can HMRC go?
This is usually the question that keeps people awake, and the answer depends on why the tax was wrong.
- 4 years where a mistake was made despite reasonable care
- 6 years where the error was careless
- 20 years where the behaviour was deliberate
The difference between "careless" and "deliberate" is worth a great deal of money and, in some cases, worth your liberty. Which category HMRC places you in is not a fact. It is a judgement, and it can be argued.
That is a large part of what we do.
What it actually costs you if it goes wrong
Beyond the tax itself, HMRC charges interest and penalties. Penalties are based on behaviour and, critically, on whether the disclosure was prompted or unprompted.
An unprompted disclosure, made before HMRC comes looking, attracts a substantially lower penalty than the same disclosure made after a letter lands. Sometimes dramatically lower.
So if you already know something is wrong, the most expensive thing you can do is wait to be caught. Come to us first. That sentence has saved our clients more money than anything else on this page.
How we help
We take over the correspondence. HMRC deals with us, not you.
We work out what they actually know, which is often less than the letter implies. We establish what is genuinely in dispute and what is not. We assemble the evidence, we argue the behaviour category where it is arguable, and we negotiate the settlement.
Where a disclosure needs to be made, we make it properly, because a disclosure that is incomplete is worse than none at all.
And we tell you the truth about your position, including when it is weak. You are not helped by an adviser who tells you what you want to hear.
Fee protection
Defending an enquiry takes time, and the fees are not covered by your normal accountancy package. Nobody plans to be investigated, and HMRC selects plenty of people at random who have done nothing wrong at all.
Tax investigation (fee protection) cover costs £120 a year and is included in Xpert Growth+. It covers our fees if HMRC opens an enquiry. For most business owners it is the cheapest peace of mind they will buy all year.
What it costs
Investigation work is priced individually, because the range is enormous. A simple aspect enquiry answered properly may take a few hours. A COP9 disclosure can run for months.
We will give you a fee estimate up front, and we will tell you at the outset whether we think the position is defensible. If you have fee protection cover, our fees are met by the policy.
HMRC investigations: frequently asked questions
HMRC has written to me. What should I do first?+
Do not reply. Send us the letter. The first response frames the whole enquiry, and it is very difficult to unsay something afterwards. A short delay while you take advice is normal and will not be held against you.
Does an enquiry mean HMRC thinks I have done something wrong?+
Not necessarily. HMRC opens some enquiries at random, and others because a figure looks unusual for your sector even when it is entirely correct. Plenty of enquiries close with no adjustment at all.
How long does an HMRC enquiry take?+
An aspect enquiry may resolve in weeks. A full enquiry commonly takes months. A COP9 disclosure can take a year or more. Having it handled properly tends to shorten it, because the correspondence stops going round in circles.
What is COP9?+
Code of Practice 9 is used where HMRC suspects deliberate tax fraud. You are offered the Contractual Disclosure Facility: make a full disclosure and HMRC will not pursue a criminal prosecution for the matters disclosed. There is a 60-day window and the consequences of handling it badly are severe. Do not attempt it alone.
I know I have underdeclared. Should I come forward?+
Almost always, yes. An unprompted disclosure attracts significantly lower penalties than one made after HMRC has contacted you, and it removes the risk of the situation escalating. This is a conversation worth having in confidence, and we can have it before you commit to anything.
Can you take this on if you are not my accountant?+
Yes. We are frequently brought in for investigations by businesses whose regular accountant does not do this work. We handle the enquiry and hand it back cleanly when it is done.
Had a letter from HMRC?
Do not reply to it yet. Speak to us first, in confidence, and at no cost.