Can HMRC ask for information for a year earlier on an individual’s personal tax return, to help them check 2016/17? We take a further look at the rules.
The tax enquiry
No one would like to be the subject of an enquiry into their personal tax return by HMRC. However, the best way to view an enquiry is that it is a necessary check. Without it, law-abiding taxpayers would be paying more tax rather than the tax being collected from those who unfairly avoid it. Sometimes though, tax inspectors can overstep their authority.
The enquiry window
Known as the “enquiry window”, HMRC is bound by a rigid timetable in which it can open an enquiry into tax returns.
HMRC has up to twelve months to start an enquiry from the date the return was submitted, if the return is submitted on or before the normal deadline.
If the return is submitted after the normal deadline then the enquiry window will run until the next quarter day (30 April, 31 July etc.) following the first anniversary of when the return was submitted. For example, if a 2016/17 return is submitted on 1 March 2018 (a month and a day late), the enquiry window will end on 30 April 2019. Which is a good reason to file on time.
What if the return is amended?
Within 12 months of the return being submitted, the individual or their accountant are able to amend the tax return. If a return is amended, then the enquiry window does not change. Instead a separate enquiry window is given for the amendment. This will run from the date the amendment was made to the quarter day that follows its first anniversary.
One point which is sometimes overlooked or not understood by tax inspectors is that when an enquiry is started within the window of an amendment but after the window for the original tax return, HMRC can only make enquiries regarding the amendment.
What about earlier year information?
Some inspectors will ask for information on prior periods to that covered by the tax return which is being investigated. If this happens you should politely but firmly refuse as they should not be doing this.
Inspector rules
Some tax inspectors do argue that they can not understand the years figure being enquired about without knowing how a figure for an earlier year was arrived at. This usually occurs when an inspector is reviewing figures in accounts which include adjustments brought forward from an earlier year. Again, this request should be refused.
A special assessment must be raised if an inspector wishes to question a figure outside the enquiry window. These too have many rules which prevent an inspector taking liberties.
We strongly advise that if you do find yourself subject to an enquiry, you are professionally represented by somebody who understands HMRC’s powers.
