Compliance checks, information notices, penalties, disclosures and tax appeals
HMRC Tax Investigation and Compliance Check Representation
An HMRC tax investigation should be managed from the opening letter through to closure, settlement or appeal with a consistent evidence record. We review the legal route, tax periods, information requested, technical treatment, potential tax, interest and penalty behaviour before substantive responses are sent. The service covers individuals, landlords, directors, companies and employers across Exeter and the surrounding Devon districts.
Direct answer
What to Do When an HMRC Tax Investigation Starts
Preserve the records, record the date the letter was received and identify the response deadline. Before answering the detailed questions, establish whether HMRC has opened a return enquiry, a wider compliance check, a VAT or employer check, a formal information-notice process or a specialist COP8 or COP9 investigation.
The response should be based on a reconciled factual chronology and the correct tax treatment. It should answer the issue raised without creating unsupported admissions, omitting relevant facts or sending large volumes of unexplained data that do not reconcile to the submitted return.
Review the HMRC tax investigation letter before replying
The opening route, deadline, legal basis, tax periods and exact questions determine the work required.
Do not guess, alter records or give an incomplete narrative
Later corrections can undermine credibility where the original answer was not checked against the records.
Tax liability, behaviour and penalty are different questions
An underpayment does not automatically prove careless or deliberate conduct, and the evidence for each issue differs.
The route determines the response strategy
Different Types of HMRC Tax Investigation and Compliance Check
The public often uses “tax investigation” for every HMRC intervention. In practice, the tax, statutory route and seriousness of HMRC's concerns affect the information powers, disclosure position, time limits and risk.
Enquiry into a Tax Return or Claim
HMRC may examine one issue or the wider return, including business profit, property income, expenses, foreign income, residence, capital gains, reliefs or repayments.
Company Accounts and CT600 Compliance Check
Turnover, deductions, director loans, remuneration, capital allowances, losses, associated companies, R&D claims and connected transactions may be tested.
VAT Return, Registration and Input-Tax Check
HMRC may review sales, rates, exemptions, input tax, partial exemption, property, international services, reverse charges and earlier-period errors.
Payroll, Benefits, Status and National Insurance
Salary, expenses, benefits, workers, subcontractors, off-payroll arrangements, minimum wage and employer records can be examined together.
Construction Contractor and Subcontractor Check
Employment status, verification, gross-payment status, deductions, monthly returns, cost records and the domestic VAT reverse charge can create connected risks.
Rental Income and Property Disposal Investigation
Ownership, omitted rent, finance costs, repairs, capital improvements, private use, residence relief and 60-day Capital Gains Tax reporting may be reviewed.
Foreign Income, Assets and Offshore Data
Bank interest, investments, foreign property, pensions, residence, remittances, foreign tax credit and offshore entities may be compared with information received from other jurisdictions.
Code of Practice 8 Investigation
HMRC's Fraud Investigation Service uses COP8 where substantial or technically complex risk requires specialist investigation but the COP9 CDF route is not considered appropriate.
Code of Practice 9 and the CDF
The 60-day decision and Outline Disclosure require immediate specialist attention because the CDF is a contractual civil investigation procedure concerning suspected fraud.
Worldwide or Let Property Disclosure Check
HMRC can question the years, income, expenses, behaviour, tax, interest, penalties and completeness of a voluntary disclosure before accepting the offer.
Claim Verification and Repayment Check
Employment expenses, losses, R&D, construction deductions, pension relief and repayment claims may be withheld while HMRC verifies evidence and entitlement.
Assessment, Closure Notice, Penalty or Appeal
The appeal must identify the decision challenged, grounds, evidence and any request to postpone disputed direct tax before the relevant time limit expires.
Investigation control from the first response
How an HMRC Compliance Check Is Analysed
A controlled response process avoids answering a technical question before the underlying records, tax calculation and wider factual consequences have been reviewed.
What exactly is HMRC checking?
The letter, legislation, taxes, entities, periods and questions define the initial scope.
Is the enquiry or assessment within the applicable time limit?
Return-enquiry windows and discovery or assessment limits are separate questions.
Do the source records reconcile to the filed figures?
Bank, ledger, invoice, contract and third-party information are matched to the return.
What is the correct technical treatment?
The actual tax position is recalculated without assuming HMRC's suggested treatment is correct.
What happened, when and who made each decision?
A consistent timeline supports the tax analysis and the behaviour position.
Was reasonable care taken?
Advice, systems, knowledge, complexity and steps taken to check the return are evidenced.
What must be told, helped with and made available?
Disclosure quality affects penalty reductions but must remain complete and accurate.
Can undisputed tax be paid while issues remain contested?
Cash flow, interest, postponement and Time to Pay are considered separately from liability.
Settlement, closure, review, ADR or tribunal?
The route depends on which facts and legal issues remain genuinely in dispute.
Standard onshore inaccuracy penalty framework
Penalty Exposure Depends on Behaviour and Disclosure Quality
The potential lost revenue is multiplied by a penalty percentage. The statutory range is determined by behaviour and whether the disclosure is unprompted or prompted. The final percentage within the range is influenced by the quality of telling, helping and giving HMRC access to records.
No inaccuracy penalty
Tax and interest may still be payable, but an inaccuracy despite reasonable care is not a careless or deliberate penalty case.
0%–30% unprompted; 15%–30% prompted
The evidence must show whether the person failed to take reasonable care in the actual circumstances.
20%–70% unprompted; 35%–70% prompted
Deliberate behaviour requires evidence that the inaccuracy was knowingly brought about.
30%–100% unprompted; 50%–100% prompted
Concealment involves active steps intended to hide the inaccuracy and carries the highest standard range.
Formal and informal requests are not identical
HMRC Information Requests, Schedule 36 Notices and Meetings
Information should be supplied accurately and in a usable form, but the request should first be examined for relevance, statutory basis, period, availability, privilege, personal data and any appeal right.
A written request can still require a considered response
Clarification, a proportionate extension or an agreed method of providing electronic records may be appropriate where the request is unclear or cannot reasonably be completed by the date.
Information must be reasonably required to check the tax position
A formal notice can require statutory records and other relevant information or documents. Failure to comply can create fixed, daily and tax-related penalties.
The notice must be read requirement by requirement
There is generally no appeal against a requirement to provide statutory records. Other requirements and related penalties may carry a 30-day appeal route, subject to the legislation.
The purpose and evidence should be understood before attendance
Meeting answers form part of the investigation record. The participants, agenda, documents and factual chronology should be prepared in advance.
Assessment periods depend on the tax and facts
How Far Back HMRC Can Investigate and Assess
HMRC can ask questions about records for several reasons, but an assessment must be made within the applicable statutory limit. The table below gives common aligned limits rather than a conclusion for every tax.
Ordinary assessment period
Commonly applies where tax has been lost without careless or deliberate behaviour, subject to the rules for the particular tax and assessment.
Careless behaviour
Applies to specified direct taxes where the loss of tax was brought about carelessly by the taxpayer or a person acting on their behalf.
Specified offshore matters or transfers
Can apply to Income Tax, Capital Gains Tax and Inheritance Tax where the statutory offshore conditions are met.
Deliberate behaviour and specified failures
Can apply where the loss was brought about deliberately and in certain failure-to-notify or other legislated cases.
Specialist Fraud Investigation Service routes
Code of Practice 8 and Code of Practice 9 Are Not Routine Enquiries
Both routes require immediate review of the opening material, preservation of records and control of direct communications. COP9 carries a contractual 60-day decision and should not be answered as an ordinary letter.
Technically complex or substantial tax risk
COP8 is operated by HMRC's Fraud Investigation Service where the CDF under COP9 is not considered appropriate. Cases can involve tax avoidance, offshore structures, major transactions, valuations, reliefs or substantial technical uncertainty.
- Review the specific concerns and tax periods
- Preserve business and personal evidence relevant to the issues
- Prepare the technical and factual position before meetings
- Monitor whether the investigation's emphasis changes
Civil investigation where HMRC suspects fraud
The recipient has 60 days to accept or reject the CDF offer. Acceptance requires a valid Outline Disclosure describing deliberate behaviour and other irregularities. A false, incomplete or omitted deliberate disclosure can remove the intended protection for undisclosed conduct.
- Do not accept or reject before the full known facts are reviewed
- Identify every tax, role, entity and period affected
- Prepare an honest Outline Disclosure within the 60-day period
- Coordinate tax investigation and independent legal advice where needed
Correcting tax before or during HMRC contact
Voluntary Disclosure, Worldwide Disclosure Facility and Let Property Campaign
The disclosure route depends on the tax, source, years, behaviour and whether HMRC has already prompted the taxpayer. Notification should not be made through a facility that cannot legally or practically cover the complete liability.
Recent errors may still be within the amendment window
The amended return, supporting computation and payment are prepared for the affected year. An amendment does not correct separate older years outside the amendment period.
General historic liabilities can require formal disclosure
The tax, interest, penalties, behaviour and offer are calculated before submission. Deliberate conduct can require the CDF rather than an ordinary disclosure route.
Offshore liabilities must be disclosed within 90 days after acknowledgement
Foreign income, gains and assets are reviewed by year and source. Full payment or agreed payment arrangements are normally required when the disclosure is submitted.
Historic residential letting income is calculated by tax year
Ownership, rent, expenses, finance costs, losses, tax, interest and penalties are reconstructed before the landlord makes the disclosure offer.
Disagreement after HMRC reaches a decision
Appeal, Statutory Review, ADR and the First-tier Tribunal
A dispute route should be chosen for the issue that remains unresolved. A factual disagreement, valuation issue, technical interpretation and procedural error may require different evidence and settlement strategy.
Most direct-tax appeals have a 30-day deadline
The appeal identifies the decision, grounds and outcome sought. A request to postpone disputed direct tax may be considered separately where the conditions are met.
An independent HMRC officer reviews the appealed decision
The review considers the existing decision, evidence and representations. The taxpayer can normally appeal to the tribunal after the review conclusion if the dispute remains.
Mediation can help resolve factual and communication barriers
ADR can be requested during an enquiry and at stages of tribunal proceedings. HMRC aims to decide suitability within 30 days of the application.
The First-tier Tribunal independently determines the appeal
Pleadings, evidence, witness statements, bundles, legal authorities and procedural directions must be prepared for the category and complexity of the case.
Agreed Exeter guide fees
HMRC Tax Investigation, Compliance Check and Disclosure Fees
These are the previously agreed fees. Investigation work is scoped from the HMRC letter, tax periods, volume of records, technical issues, behaviour risk and stage of the case. No outcome or penalty level can be guaranteed.
HMRC compliance-check representation
A defined compliance check covering review, calculations, evidence, correspondence and settlement work within the agreed scope.
Tax-investigation consultation
A scheduled review of the HMRC letter, known facts, immediate deadlines and recommended next steps.
Worldwide Disclosure Facility
Historic offshore calculations, interest and penalty analysis, and formal disclosure to HMRC.
Let Property Campaign disclosure
Historic rental-profit calculations, interest and penalty analysis, and formal disclosure to HMRC.
Code of Practice 8 investigation
Specialist technical, factual, disclosure and correspondence work is scoped after the opening material and records are reviewed.
Code of Practice 9 and Contractual Disclosure Facility
COP9 work, specialist tax coordination and any separate legal-advice requirement are scoped immediately after the CDF offer is reviewed.
Appeal, statutory review, ADR or tribunal preparation
The decision, tax at stake, evidence, procedural stage and hearing requirements are reviewed before the work is quoted.
Records required after engagement
Information Needed to Review an HMRC Investigation
The first enquiry requires only a summary. Once the scope is agreed, documents are collected securely and indexed so that the response record remains complete.
HMRC correspondence
- Opening letter and enclosures
- Information requests and formal notices
- Meeting notes and earlier replies
- Assessments, penalties and decision letters
Tax filings
- Returns and amendments for every relevant period
- Tax computations and supporting schedules
- Accounts and disclosure submissions
- Payment and repayment history
Financial records
- Ledgers and trial balances
- Business and relevant personal bank accounts
- Invoices, contracts and third-party statements
- Cash, stock and asset records
Advice and decision history
- Professional advice obtained
- Emails and contemporaneous notes
- Tax research and filing instructions
- Who prepared, reviewed and approved the return
Personal and international evidence
- Travel and residence records
- Foreign tax returns and bank statements
- Property ownership and disposal documents
- Trust, company or partnership records
Chronology and missing records
- Timeline of events and transactions
- Records no longer available and why
- Third-party replacement evidence
- Assumptions and estimation methodology
Investigation representation process
From Opening Letter to Closure or Appeal
The process protects deadlines while the records and technical position are reviewed, rather than sending substantive answers before the evidence has been reconciled.
Letter, powers and immediate deadlines reviewed
We identify the investigation route, taxes, periods, questions, appeal rights and urgent actions.
Returns and source records reconciled
The factual chronology and correct tax calculation are prepared from an indexed evidence set.
Supported responses and meetings managed
Correspondence addresses the issues accurately, records disputed assumptions and controls follow-up requests.
Closure, settlement or dispute route completed
Tax, interest, penalties and payment are finalised or the appeal, review, ADR or tribunal case proceeds.
Exeter and surrounding Devon
HMRC Investigation Work Reflecting the Regional Tax Risks
The wider Exeter economy combines professional, healthcare, university and technology activity with property, tourism, construction, manufacturing, rural businesses and private wealth. The records and tax issues arising in those sectors differ materially.
Professionals, clinicians, academics and technology businesses
Multiple income sources, overseas work, expenses, R&D, company extraction, employment status and repayment claims.
Property, tourism, private clients and overseas connections
Rental income, former holiday letting, property gains, hospitality VAT, pensions, estates and foreign assets.
Manufacturing, construction, trades and rural enterprises
Cash and bank reconciliation, CIS, payroll status, stock, plant, fuel, land, family ownership and capital allowances.
Hospitality, property and owner-managed businesses
Seasonal turnover, tips, VAT, property transactions, subcontractors, directors' accounts and mixed private use.
Common technical questions
HMRC Tax Investigation FAQs
What is an HMRC tax investigation?
HMRC tax investigation is a broad public term. HMRC may describe the intervention as a compliance check, an enquiry into a return or claim, a VAT, PAYE or CIS check, a disclosure review, a Code of Practice 8 investigation or a Code of Practice 9 civil investigation of suspected fraud. The opening letter determines the legal route, periods, taxes and response required.
Does an HMRC compliance check mean HMRC believes tax fraud occurred?
No. A routine compliance check can examine whether a return, claim, payment or tax position is correct without an allegation of fraud. Penalty behaviour is considered separately and can range from reasonable care to careless, deliberate or deliberate-and-concealed conduct. Code of Practice 9 is different because it is used where HMRC suspects fraud.
What should be done first after receiving an HMRC investigation letter?
Record the date received, identify the response deadline and preserve the relevant records. The letter should then be reviewed for the tax, periods, issues, legal powers and documents requested before any detailed explanation is sent. A rushed narrative or an unreviewed document dump can create inconsistencies and widen the enquiry.
Must every document requested by HMRC be supplied?
HMRC can ask informally for records and can use statutory information powers. A formal taxpayer notice can require statutory records and other information or documents reasonably required to check the tax position. Appeal rights and restrictions depend on the requirement; there is generally no appeal against a requirement to provide statutory records, while other parts of a notice may carry appeal rights.
Can an accountant communicate with HMRC during the investigation?
Yes. The taxpayer can authorise an adviser using the appropriate agent authority, including form 64-8 or a temporary compliance authorisation where applicable. The taxpayer remains responsible for the accuracy and completeness of the information provided, and HMRC can still require direct attendance or answers in suitable cases.
How far back can HMRC assess tax?
The relevant assessment limit depends on the tax, facts and behaviour. Common direct-tax limits are four years in ordinary cases, six years where careless behaviour caused the loss, 12 years for specified offshore Income Tax, Capital Gains Tax and Inheritance Tax matters, and 20 years for deliberate behaviour or certain failures to notify. The precise legislation and period must be checked.
What are the standard penalties for an inaccurate return?
For standard onshore inaccuracies, reasonable care normally produces no inaccuracy penalty. The statutory ranges are 0% to 30% for an unprompted careless disclosure and 15% to 30% when prompted; 20% to 70% or 35% to 70% for deliberate but not concealed behaviour; and 30% to 100% or 50% to 100% for deliberate and concealed behaviour. Offshore and other penalty regimes can produce different or higher results.
Can a careless penalty be reduced to nil?
An unprompted disclosure of a careless inaccuracy can fall to 0% where the disclosure quality supports the maximum reduction. A prompted careless disclosure has a standard minimum of 15%. Whether the disclosure is prompted, the behaviour category, potential lost revenue and the quality of telling, helping and giving access all require evidence.
What is Code of Practice 8?
Code of Practice 8 is used by HMRC's Fraud Investigation Service for substantial or technically complex matters where the Contractual Disclosure Facility under Code of Practice 9 is not considered appropriate. It can concern avoidance, offshore structures, transactions, valuations or other high-risk technical issues. The case can change route if the evidence later indicates suspected fraud.
What is Code of Practice 9 and the Contractual Disclosure Facility?
Code of Practice 9 is HMRC's civil investigation procedure where fraud is suspected. The recipient has 60 days from receiving the CDF offer to accept or reject it. Acceptance requires a valid Outline Disclosure of deliberate behaviour and other irregularities. Where the contract is followed and the disclosure is complete, HMRC undertakes not to begin a criminal investigation into the deliberate conduct disclosed, subject to the terms and limits of the CDF.
Can an HMRC assessment or penalty be appealed?
Most direct-tax decisions must be appealed to HMRC within 30 days of the formal decision notice. Depending on the decision and procedural stage, the taxpayer may continue discussions, request or accept a statutory review, notify the appeal to the First-tier Tribunal and consider Alternative Dispute Resolution. The decision letter and relevant legislation determine the route.
When should a voluntary disclosure be considered instead of waiting for HMRC?
A disclosure should be considered as soon as an earlier tax omission or inaccuracy is identified, before assuming that an amendment to the latest return will correct historic years. The route may be an amended return, the Digital Disclosure Service, Let Property Campaign, Worldwide Disclosure Facility or the Contractual Disclosure Facility where deliberate behaviour caused a tax loss. The tax, years and behaviour should be calculated before notification where the facility permits.
Start with the HMRC letter, not a detailed document upload
Tell Us the Tax, Periods and Response Deadline
A short summary is enough for the initial review. We will confirm the investigation stage, immediate action, secure information required and agreed fee before substantive representation begins.