Compliance

Facing an HMRC Enquiry? Here's What You Need to Know

10 March 2026

7 min read

By Suyesh Sharma

Written by Suyesh Sharma, FCCA, Founder and Managing Director, Metta Accountants.

Published 10 March 2026

Receiving a letter from HMRC is one of the most stressful experiences a taxpayer can face. The impulse is to respond immediately and cooperate fully - but this instinct, while understandable, can be dangerous without professional guidance. Understanding what type of enquiry you are dealing with, what HMRC is entitled to ask for, and how to respond strategically is critical from the very first contact.

Types of HMRC enquiry

Section 9A Enquiry (Aspect or Full)

Opened within 12 months of your Self Assessment return filing deadline (or longer if the return was filed late). An "aspect" enquiry focuses on one specific area of the return - a particular source of income, a deduction, or a relief claim. A "full" enquiry examines the entire return and all underlying records. The letter will not always make clear which type you are dealing with.

Discovery Assessment

Where HMRC has not opened a formal enquiry within the standard window but later "discovers" a loss of tax, it can raise an assessment outside the normal time limits. The time limit is four years for careless behaviour and 20 years for deliberate non-disclosure. Discovery assessments are frequently challenged - professional advice on whether the assessment is valid is essential before agreeing to pay anything.

Code of Practice 8 (COP8)

Reserved for suspected tax avoidance - typically the use of tax schemes that HMRC considers aggressive or abusive. Handled by HMRC's Fraud Investigation Service. More serious than a standard enquiry and typically involves detailed requests for documentation and explanations of commercial rationale.

Code of Practice 9 (COP9)

HMRC's most serious civil investigation process - reserved for cases of suspected deliberate tax fraud. A Contractual Disclosure Facility (CDF) offer means you can cooperate fully in exchange for immunity from criminal prosecution. Rejecting the CDF or failing to make full disclosure leads to criminal investigation. Never respond to a COP9 without specialist representation.

What HMRC can and cannot demand

HMRC has broad but not unlimited powers. Under a Section 9A enquiry, they can request documents and information that are "reasonably required" for the purposes of the enquiry. They cannot make open-ended requests for all financial records over an unlimited period - their requests must be specific and proportionate. Informal requests in an enquiry letter carry no legal force; only formal Information Notices under Schedule 36 of the Finance Act 2008 are legally binding.

You have the right to appeal an Information Notice to the First-tier Tribunal if you believe the request is disproportionate or outside HMRC's powers. Many taxpayers and their advisers successfully resist or narrow overly broad requests through this route.

The penalty regime explained

HMRC's penalties are calculated as a percentage of the "Potential Lost Revenue" - broadly the additional tax due. The rate depends on two factors:

Behaviour: Careless (30% max), Deliberate (70% max), Deliberate and Concealed (100% max). Offshore matters carry higher maximum rates of up to 200%.
Disclosure: Unprompted (minimum 0%–30%), Prompted (minimum 15%–50%). "Unprompted" means you came forward before HMRC had any reason to contact you. Once a nudge letter, compliance check, or enquiry is opened, disclosure is automatically "prompted."

These ranges mean that for genuinely careless errors, making a full and unprompted disclosure can result in a zero penalty. The difference between 0% and 70% on a £100,000 tax liability is £70,000 - which illustrates why acting quickly and engaging professional help at the first sign of an issue pays for itself many times over.

Alternative Dispute Resolution

If an enquiry reaches an impasse - where you disagree with HMRC's conclusions and formal appeal seems the only route - HMRC's Alternative Dispute Resolution (ADR) service can offer a faster, less adversarial resolution. An independent HMRC facilitator (not involved in the enquiry) mediates between the parties. ADR is free, binding if successful, and typically resolves cases within 120 days. It is significantly cheaper than Tribunal proceedings and achieves resolution in approximately 75% of cases that use it.

Document retention: your first line of defence

HMRC can enquire into returns up to six years back (or 20 years in cases of fraud). You are legally required to retain all underlying financial records for at least five years and ten months after the end of the relevant tax year for self-employed individuals. For companies, it is six years from the end of the accounting period. Losing records makes it impossible to defend legitimate deductions - creating a presumption that HMRC's estimated assessments are correct.

We Stand Between You and HMRC

Don't face an enquiry alone. We handle all HMRC correspondence, negotiate on your behalf, challenge disproportionate requests, and work to minimise penalties at every stage.