Is HMRC’s Enquiry into your Tax Return Valid?
In recent years, HMRC has ramped up its compliance efforts in a bid to close the UK’s widening tax gap, which is currently estimated at over £30 billion annually. As part of this drive, taxpayers and advisers are seeing a surge in enquiries into submitted returns. The Spending Review 2025 allocated £1.7 billion over four years to fund the recruitment of 5,500 compliance officers and 2,400 debt management staff, alongside £500 million earmarked for digital transformation to help close the tax gap by an additional £7.5 billion annually by 2029/30. In simple terms, this means a marked increase in HMRC enquiries.
When opening an enquiry into a tax return, HMRC will issue a notice of enquiry. This is a relatively brief document which sets out what HMRC wants to examine.
However, the validity of a HMRC notice of enquiry is not always clear, and any procedural misstep can render the enquiry invalid. This makes it crucial for taxpayers to understand the legal framework that governs these notices, as an invalid enquiry could lead to unnecessary disruption, costs, and prolonged uncertainty. This article looks at the checks which should be taken to ensure the enquiry is valid.
1) Is the enquiry in time?
HMRC generally has 12 months from the date a company’s corporation tax return is filed to open an enquiry into that return under paragraph 24, Schedule 18, Finance Act 1998. This time limit is crucial, as any notice of enquiry issued after this window, without a valid discovery assessment, may be invalid. HMRC routinely issues ‘late’ enquiry notices so it’s important to spot them when they arise.
If a return is amended, a notice of enquiry into the amended return can be given at any time up to 31 January, 30 April, 31 July or 31 October next following the first anniversary of the day on which the amendment was made. Crucially, and something which HMRC routinely ignores, is that if the deadline into the original return has passed, the enquiry into the amended return can only consider the figures that were the subject of the amendment. We have seen several examples of HMRC opening an enquiry into aspects of the return that were not part of the amendment.
An important point to note is that if a company submitted its CT return late, the enquiry window is extended to 31 January, 30 April, 31 July or 31 October next following the first anniversary of the day on which the amendment was made.
A final point to note is that HMRC has the power to issue Discovery Assessments for periods outside of the 12-month statutory window outlined above. HMRC’s discovery powers are far reaching, but there are important statutory protections in place for the taxpayer. You can read more about Discovery Assessments here.
2) Where was the notice served?
There are many Tribunal cases that have examined whether or not a notice of enquiry was correctly served on a company, and it is a common contentious point for anyone familiar with tax investigations. The starting point for where a notice should be sent is The Taxes Management Act (TMA) 1970 section 115 which states:
Delivery and service of documents.
(1) A notice or form which is to be served under the Taxes Acts on a person may be either delivered to him or left at his usual or last known place or residence.
(2)(b) in the case of a company, at any other prescribed place, and in the case of a liquidator of a company, at his address for the purposes of the liquidation or any other prescribed place.
(3) In subsection (2) above “prescribed” means prescribed by regulations made by the Board, and the power of making regulations for the purposes of that subsection shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.
The first point to note here is that the notice of enquiry must be served on the company within the appropriate time limits. This means it must be received by the company, at the correct address, before the enquiry deadline has passed. We have seen several instances of HMRC dating enquiry notices before the enquiry deadline has passed – but the delivery of the notice to the company was after the enquiry deadline had passed. If the company can prove that the notice was received after the enquiry window had closed, it is highly likely the enquiry will be invalid. It’s therefore important to date-stamp and document when HMRC correspondence is received.
Interestingly, HMRC’s published guidance on this matter takes a very optimistic position on postal timings. EM1506 states ‘Unless the contrary is proved, the notice is taken to be delivered as it would have been through the ordinary course of post. Royal Mail’s published position is that second class post takes up to 3 working days to be delivered and first-class post takes 1 working day. Working days include Saturdays but not Sundays or Bank Holidays’. Advisers will be very aware that in recent years, postal delays are very common when receiving correspondence from HMRC. It is not unusual to receive correspondence up to a week after the date of the letter. HMRC takes the view that first class post takes a single working day to arrive – this does not align with our experience.
The second possible point of contention is where the notice of enquiry was sent. In most cases, HMRC will issue the notice of enquiry to the company’s registered office. This is likely to satisfy the requirement to send the notice to ‘any other prescribed place’ as per TMA 1970 s115 (2)(b). However, we have seen instances where HMRC served the notice of enquiry to an address which was neither the company’s registered office, it’s trading address, nor its last known place of business. The validity of the notice was successfully challenged.
A third point of contention is whether serving the notice of enquiry to the company’s tax agent constitutes a valid serving. The Court of Appeal, in the case of William Tinkler v HMRC [2019] EWCA 1392, found that a formal notice of enquiry is a form which must be sent to the taxpayer, and not the taxpayer’s agent. Interestingly, although the serving of the notice was deemed to be invalid, The Supreme Court determined that HMRC’s enquiry was, ultimately, valid, because the tax agent replied and engaged with the enquiry process. It was found that both parties shared a ‘common assumption’, that an enquiry had been validly opened and had HMRC been notified of the possible error at the start of enquiry, it would have been able to re-issue a correct notice.
Challenging the validity of a notice based on where it was sent is very much dependent on the specific facts of the case. If you have any doubts as to whether to notice was delivered to the correct address and/or party, it’s important that specialist advice is taken prior to providing any response to HMRC’s opening letter.
3) Check for Basic Errors
When reviewing a notice of enquiry, it’s essential to check for basic but potentially critical errors that could invalidate the notice. As many readers will be aware, HMRC routinely makes administrative mistakes – unsurprisingly, these mistakes extend to enquiry notices.
It is crucial that the notice correctly states the company’s legal name. Errors such as misspelling, using a trading name, or referencing the wrong entity can render the notice invalid.
Similarly, the notice must clearly identify the correct accounting period under enquiry; any discrepancy in the start or end dates may indicate a procedural flaw. In Mabbutt [2016] TC 05075 it was found that no valid notice of enquiry had been given because the letter to the taxpayer had mistakenly referred to their intention to enquire into his return ‘for the year ended 6 April 2009’ instead of the year ended 5 April 2009. However, the decision was appealed by HMRC. In the Upper Tribunal’s judgment, the key issue was how the notice would be understood by a reasonable taxpayer reading it objectively. The Tribunal found that, despite the reference to the year ended 6 April 2009, there could be no real doubt that HMRC intended to open an enquiry into the correct return. The incorrect date was viewed as a minor clerical error, and it was clear from the context of the letter that HMRC’s intention to enquire into the relevant return was unmistakable. Therefore, the notice was held to be valid despite the technical inaccuracy.
We have recently been asked if a notice of enquiry should reference the relevant legislation that the enquiry is being opened under. In HMRC v Raftopoulou [2018] EWCA Civ 818; [2018] BTC 17 it was found that there is no prescribed form for a notice of enquiry. However, although the contents of the notice need not be in a prescribed form, it must be clear from the notice that HMRC intends to enquire into the return. Crucially, it was determined that the correct starting point is a consideration of the terms, context and purpose of the relevant statutory provisions. This would suggest that although there is no explicit legislation requiring HMRC to state the legislation which the enquiry is being opened under, any enquiry notice which does not contain the relevant statutory provisions may well be open to challenge.
As HMRC intensifies its compliance activity, the frequency and scrutiny of HMRC compliance checks is only set to increase. It’s therefore more important than ever for taxpayers and their advisers to carefully assess the validity of any notice of enquiry. Procedural oversights by HMRC such as issuing notices out of time, serving them to the wrong address, or making fundamental errors in the notice itself, can render an enquiry invalid. Identifying and challenging these flaws at the outset can prevent unnecessary expense, delay, and stress.
While some minor mistakes may not invalidate a notice if the intent is objectively clear, others involving timing or improper service can have significant consequences. Given the complexity and nuance involved, early expert advice is essential when faced with an HMRC enquiry.
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