Receiving a tax enquiry letter from HM Revenue & Customs (HMRC) is never welcome, but how you respond from the outset can have a significant impact on the outcome.

Acting quickly, understanding the process, and taking professional advice early are key to protecting your position.

Often, the tax authority only gives a short window to respond – typically 30 days – so communications from them should not be ignored or left.

Why you might be selected

HMRC rarely opens enquiries at random, but it does on some occasions.

However, normally it is the result of its powerful Connect system, which cross-checks tax returns against information from banks, other Government departments, international tax authorities, and even third-party disclosures, such as e-commerce websites like eBay.

Businesses may also be flagged if their figures differ significantly from others in their sector.

While HMRC does run a very small random enquiry programme, it is safer to assume they have identified a potential risk in your return and that you should take action to address it.

Understanding the opening letter

The first letter from HMRC is important. It may point towards the areas of concern – sometimes specifically, sometimes more broadly.

More serious cases may be investigated under Code of Practice 9 (COP9), where HMRC suspects deliberate tax fraud, or Code of Practice 8 (COP8), often involving complex tax avoidance arrangements.

Other enquiries follow standard legislation and may begin with an informal request for documents.

Handling requests for information

Even where the request is informal, it should be taken seriously. Only provide information relevant to the period and entity under enquiry.

You should also check whether separate notices are required for other parties, such as company directors. Avoid volunteering documents that go beyond what HMRC is entitled to request.

As mentioned, it is best to seek professional advice at the earliest opportunity to ensure you take the right course of action.

Dealing with inaccuracies

If you or your adviser identifies errors at an early stage, prompt and complete disclosure is essential.

While the fact that an enquiry has already started will usually affect the penalty position, full co-operation can still significantly reduce the final amount.

Tax investigations can be complex and high-stakes. Seeking expert advice early and taking out dedicated tax investigation protection can help resolve matters efficiently, minimise disruption and achieve the best possible outcome.

To find out more about our tax investigation service, please get in touch.