Types of checks on returns

By Tolley in association with Emma Broadbent of Grant Thornton
OMB_tax_img4

The following Owner-Managed Businesses guidance note by Tolley in association with Emma Broadbent of Grant Thornton provides comprehensive and up to date tax information covering:

  • Types of checks on returns
  • Introduction
  • Time limits
  • Information notices
  • How a compliance check arises ― risk-based checks
  • Random checks
  • Types of checks
  • Other types of checks
  • Investigations

Introduction

This guidance note and the following notes in this section mostly use the term ‘compliance check’ or ‘check the return’ in line with HMRC’s current terminology. However, the term ‘enquiry’ is still used in some HMRC guidance and in the referenced legislation from TMA 1970 and FA 1998.

HMRC can make a formal check, or an informal check on a return, and it is important to distinguish the type of check being made.

Where the enquiry window is still open (see below), HMRC will primarily check a return using the legislation at TMA 1970, ss 9A, 12AC (for individuals and trustees and partnerships respectively) and FA 1998, Sch 18, para 24 (for companies). This is a formal check.

However, HMRC may also request information on an informal basis, through FA 2008, Sch 36. This framework applies to income tax, corporation tax, capital gains tax and VAT, and provides HMRC with additional powers to obtain information and to inspect businesses.

HMRC will commonly use the powers provided by FA 2008, Sch 36 in the following circumstances:

  • a)when HMRC has made an informal request for information and / or documents during a check and the request has not been complied with so that a formal notice is required, or
  • b)the enquiry window has closed and HMRC believes there has been a loss of tax

The introduction of FA 2008, Sch 36 also marked the change in the approach and language used by HMRC from one of ‘opening enquiries’ to ‘checking returns’. See the HMRC FAQs  in respect of compliance checks.

Time limits

The enquiry window remains open for 12 months from the date of filing for most entities, assuming the return is filed on time.

More on Checks on returns: