With the Self-Assessment deadline of 31 January quickly approaching it is an opportune time to remind ourselves of the time limits for HMRC enquiries.
The time limits that enable HMRC to open an enquiry into a return are set out in legislation:
- Section 9A Taxes Management Act 1970 for individuals
- Section 12AC Taxes Management Act 1970 for partnerships
- Schedule 18 Para 24 Finance Act 1998 for companies
In general terms, the window for HMRC to commence an enquiry is 12 months from the delivery of the return. If the return is filed late or amended, the window for an enquiry is extended to the quarter day following the anniversary of the filing of the return. The quarter days are 31 January, 30 April,31 July and 31 October.
So, if a Self-Assessment return for 2023 is filed with HMRC on 30 November 2023 the enquiry window is open up to 29 November 2024. If the return for 2023 is filed late, e.g. on 1 March 2025, the enquiry window is open up to 31 March 2025 (based upon the quarter day after the filing date been 30 April 2024).
HMRC’s enquiry notice should specify the legislation under which the enquiry is been made. A number of enquiries are made annually on an entirely random basis i.e., there are no specific concerns HMRC has. Random enquiries are seen as a deterrent to encourage compliance. Most enquiries will be based on specific selection criteria. Whilst HMRC will usually have concerns when they start an enquiry into a return, they are not obliged to reveal what those concerns are. When faced with an HMRC enquiry taxpayers should bear in mind HMRC has a vast bank of intelligence to work from. There is absolutely no merit in withholding relevant facts or information from HMRC as the chances are HMRC already knows or will find out. HMRC’s Connect Systems hold an enormous amount of information that can be used to tackle evasion. It is believed to contain around 55 bn items of data and includes the following sources:
- Credit and debit card accounts.
- Land Registry
- Airbnb
- Property websites such as Zoopla and Rightmove.
- Google Street View.
- Council tax records.
- Electoral roll
The above should not be seen as exhaustive as there are countless other sources available. If an HMRC enquiry letter is received it must be assumed that HMRC holds information that casts doubt on the accuracy of a return. On odd occasions, the information held by HMRC can be shown to be inaccurate but this is invariably not the case. Whilst the enquiry regime is well embedded HMRC has been able to supplement this with Compliance Checks.
HMRC conducts Compliance Checks using information powers under Schedule 36 Finance Act, where necessary. Whilst the lines between enquiries and checks can become blurred on occasions the relevant legislation should be referenced to ensure HMRC is correctly acting within its powers. Compliance checks are done to check a taxpayer’s tax position in relation to years for which returns have not been submitted.
So before finally signing the declaration on the return it is worth pausing to consider whether everything is complete. In cases of doubt, it is always going to be worthwhile seeking a second opinion. Failure to do so could end in a protracted enquiry with the potential for interest and penalties for tax liability not shown on a return.
If you have any further queries on this subject please reach out to us at 01902 711370 or email enquiries@uklandlordtax.co.uk if you have any questions or require our expert assistance.
