What Happens During an HMRC Tax Investigation?

An HMRC tax investigation usually starts with a letter. It names the return or period HMRC wants to look at, says what it needs from you and gives a date to reply by. What follows is a fairly set process, and the decisions made in the first few weeks shape the outcome more than anything that comes later.

This guide sets out the HMRC investigation process step by step, how far back HMRC can look, how penalties are worked out and what to do if a letter has arrived.

What is an HMRC tax investigation?

HMRC calls most investigations “compliance checks”. A check is a review of whether the right amount of tax has been paid, and it can cover Self Assessment, Corporation Tax, VAT, PAYE or several of these at once.

Checks vary a great deal in size. An aspect enquiry looks at one item on a return, such as a large expense claim or a capital gain. A full enquiry looks at the whole return and the records behind it, and can spread across several years. At the far end is a Code of Practice 9 (COP9) investigation, which HMRC’s Fraud Investigation Service uses where it suspects serious fraud. COP9 runs to its own rules and is covered further down.

Being selected does not mean HMRC has decided you owe money, only that something in the information it holds has prompted a closer look.

Why HMRC opens an investigation

HMRC opened 299,000 compliance cases in 2025 to 2026 and brought in £50.2 billion in compliance yield (CIOT, 2026; GOV.UK, 2026). Much of that work now starts with data. HMRC receives information from banks, employers, online platforms, the Land Registry and overseas tax authorities, and compares it with what has been declared.

Common triggers include income that does not match third-party data, expense claims that look high for the type of business, a large or unusual capital gain, undeclared rental income and campaigns aimed at a particular sector. Some checks are simply random. HMRC does not always say why it has opened a check, so the opening letter needs reading carefully before any reply goes back.

The HMRC investigation process, step by step

1. The opening letter

For Self Assessment, HMRC can open an enquiry into a return filed on time at any point up to 12 months after it receives the return, and a little longer for a late one (HMRC, SAM31100). The letter sets out what HMRC is checking and what it wants to see, and usually comes with a factsheet explaining the process. HMRC sometimes opens a check by phone. If that happens, you can ask for everything to be put in writing.

2. Requests for information and documents

HMRC will ask for records such as bank statements, invoices, contracts, payroll records or working papers. The first request is normally informal. If the information does not arrive, HMRC can issue a formal information notice under Schedule 36 of the Finance Act 2008, and its own guidance is clear that you “cannot choose to ignore an information or inspection notice” (HMRC, CC/FS1a). Failing to comply can bring a £300 penalty, then daily penalties of up to £60, and in serious cases up to £1,000 a day.

If you need more time, ask for it before the deadline and explain why.

3. Meetings and visits

HMRC may ask to meet you to talk through your affairs, and it has to explain why. Attending is your choice. It may also ask to visit business premises to inspect records and assets, and will only ask to visit a home if the business is run from it (HMRC, CC/FS1a).

A meeting can feel like the quickest way to clear things up, but what you say is recorded and relied on later. Whether to attend, and who comes with you, is a decision to take with advice.

4. HMRC’s findings

Once HMRC has what it needs, it will say whether it thinks the return was wrong and, if so, why. Where there is an error, HMRC then judges the behaviour behind it: whether reasonable care was taken, whether the error was careless or whether it was deliberate. That judgement decides how far back HMRC can go and how large any penalty will be, which makes it the most contested part of most investigations.

5. How the investigation ends

HMRC either issues decision notices (an amended assessment, a penalty notice or a letter confirming the final position) or both sides agree a contract settlement, which is legally binding. HMRC may also ask you to sign a certificate confirming that everything relevant has been disclosed (HMRC, CC/FS1a). That certificate carries real weight, so it should only be signed once you are sure it is accurate.

6. If you disagree

You can send HMRC further information, ask for an independent review by an HMRC officer who has not worked on the case, or appeal to the tax tribunal. In most cases you have 30 days from the date of HMRC’s decision letter to act (HMRC, CC/FS1a). Alternative Dispute Resolution is also available for some disputes.

How far back can HMRC go?

The normal time limit for an assessment is 4 years from the end of the tax year concerned. It extends to 6 years where tax has been lost through careless behaviour, and to 20 years where the behaviour was deliberate (HMRC, CH51300). An enquiry that starts with a single year can widen into earlier years if HMRC finds a pattern, which is one more reason the first response matters.

What penalties can HMRC charge?

Penalties for errors in a return are a percentage of the extra tax due. The range depends on the behaviour HMRC finds and on whether you told HMRC about the problem before it found it (an unprompted disclosure) or after (a prompted one).

For a careless error, the penalty is between 0% and 30% of the extra tax where the disclosure is unprompted, and between 15% and 30% where it is prompted. For a deliberate error the ranges are 20% to 70% and 35% to 70%. Where the error was deliberate and concealed, they rise to 30% to 100% and 50% to 100%. Where reasonable care was taken, no penalty applies (HMRC, CC/FS7a).

Where a case lands inside those ranges depends on the quality of the disclosure. HMRC reduces penalties for telling it about the error, helping it work out the figures and giving it access to records. Delay counts against you, and if a disclosure takes 3 years or more the maximum reduction is usually capped (HMRC, CC/FS7a). For careless errors only, HMRC can also suspend a penalty for up to 2 years if conditions are agreed and then met.

Interest is charged on any unpaid tax from the date it was originally due, on top of any penalty.

When the investigation is more serious

Where HMRC suspects serious fraud, it may issue a COP9 letter offering the Contractual Disclosure Facility. You have 60 days to decide whether to accept (GOV.UK, Contractual Disclosure Facility). Accepting commits you to a full disclosure of all deliberate behaviour, and in return HMRC agrees not to open a criminal investigation into what you disclose. Rejecting the offer, or not replying, leaves HMRC free to start a civil or criminal investigation.

COP9 is the most serious civil investigation HMRC runs. Nothing should go back to HMRC until specialist advice is in place, and our guide to COP9 investigations explains the process in more detail.

How long does an HMRC investigation take?

There is no fixed timetable. An aspect enquiry with tidy records can close within a few months. A full enquiry, particularly one covering several years or where HMRC suspects deliberate behaviour, can run for years. Slow or partial replies tend to stretch the process out, while organised and accurate ones tend to shorten it.

What to do if HMRC writes to you

• Write down the reply date and keep the letter.
• Hold off phoning HMRC or replying until you understand what the letter is asking for and why.
• Gather the records for the period named, including bank statements, invoices, receipts, contracts and previous returns.
• Answer what has been asked. Do not volunteer extra material, and do not hold back anything that has been requested.
• If you already know something is wrong, take advice on disclosing it. A disclosure made before HMRC finds the problem attracts a lower penalty range.
• Appoint a specialist to deal with HMRC for you. You have the right to be represented, and HMRC will copy its letters to your representative (HMRC, CC/FS1a).

Frequently asked questions

Does an HMRC investigation mean I have done something wrong?

No. Some checks are random, and many end with HMRC accepting the return as filed. It does mean HMRC wants evidence, and how you respond affects how the check goes.

Do I have to attend a meeting with HMRC?

No, meetings are voluntary. HMRC can still use its formal powers to obtain information and documents.

Can my accountant deal with an HMRC investigation?

Many accountants handle routine aspect enquiries well. Full enquiries, cases spanning several years, disclosures and anything involving COP9 are specialist work, which is why many accountants refer them to a tax investigation specialist while staying the client’s main advisor.

The bottom line

An HMRC investigation follows a process, and most of the outcome is decided early: what goes into the first reply, how HMRC categorises the behaviour and how fully any problem is disclosed. Getting those right keeps the enquiry narrow and the penalties as low as the rules allow.

Speak to a specialist

WTT’s tax investigation team brings more than 25 years of HMRC investigation experience, from single-issue compliance checks to COP9. We deal with HMRC on your behalf, manage every request and work to close the matter on the best terms available. If HMRC has been in touch, contact us today on +44 (0)20 3468 0000 or info@wttconsulting.co.uk for a confidential review.

References

Chartered Institute of Taxation. (2026). HMRC performance in 2025-26: how did they do? https://www.tax.org.uk/hmrc-performance-in-2025-26

GOV.UK. (2026). HMRC compliance yield: technical note. HM Revenue & Customs. https://www.gov.uk/government/publications/hmrc-annual-report-and-accounts-2025-to-2026-technical-notes/hmrc-compliance-yield-technical-note

HM Revenue & Customs. About compliance checks: CC/FS1a. https://www.gov.uk/government/publications/general-information-about-compliance-checks-ccfs1a/about-compliance-checks-ccfs1a

HM Revenue & Customs. Compliance checks: penalties for inaccuracies in returns or documents, CC/FS7a. https://www.gov.uk/government/publications/compliance-checks-penalties-for-inaccuracies-in-returns-or-documents-ccfs7a/compliance-checks-for-penalties-of-inaccuracies-in-returns-or-documents-ccfs7a-factsheet

HM Revenue & Customs. Compliance Handbook, CH51300: assessing time limits. https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch51300

HM Revenue & Customs. Self Assessment Manual, SAM31100: enquiry window. https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam31100

GOV.UK. Admitting tax fraud: the Contractual Disclosure Facility (CDF). HM Revenue & Customs. https://www.gov.uk/guidance/admitting-tax-fraud-the-contractual-disclosure-facility-cdf

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