Owner-Managed Businesses

HMRC’s powers to open an enquiry into a return

Produced by Tolley in association with Guy Smith of inTAX Ltd
  • 01 Nov 2021 07:20

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Guy Smith of inTAX Ltd provides comprehensive and up to date tax information covering:

  • HMRC’s powers to open an enquiry into a return
  • Introduction
  • Correcting a return
  • Opening an enquiry
  • Individuals, sole traders and trustees
  • Partnerships
  • Companies
  • Amendments
  • Discovery

HMRC’s powers to open an enquiry into a return

Introduction

An important clarification needs to be made to help in the understanding of this note. Whilst the legislation refers to an ‘enquiry’, HMRC now refers to enquiries as ‘compliance checks’.

As this note specifically covers HMRC’s powers, the term enquiry has been used to match up with the language used in the legislation. However, some of the other material referred to, such as factsheets, includes the term compliance checks rather than enquiry.

For the purpose of this note, an enquiry and a compliance check have the same meaning.

An HMRC Officer has the power to either correct a return or open an enquiry, and each of these processes is discussed below.

Correcting a return

An Officer can, within nine months of receiving a self assessment tax return or a corporation tax return, amend it without opening an enquiry in order to correct:

  1. an obvious error or omission. ‘Obvious’ means that there can be no doubt what the correct entry should be. This could include correcting arithmetical errors, transposition of incorrect figures and errors of principle

  2. anything else that the Officer has reason to believe is incorrect based on information already held and where no more information is needed

TMA 1970, s9ZB; FA 1998, Sch 18, Part II, para 16

The taxpayer (whether individual, partnership or company) has no right of appeal against a correction, but does have the right to reject it by giving notice in writing within 30 days of the date it was issued by HMRC. This means that the correction has no effect and the self assessment is put back to the original figures.

Even if the taxpayer does not reject the correction in the time allowed, he may be in time to amend the return. See the Self Assessment ― amendments and corrections guidance note.

In such circumstances, an Officer can only dispute the amendment by means of a formal enquiry into the amended return.

A company can reject a

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