Receiving a letter from HMRC opening an enquiry is unsettling — but it does not mean you have done something seriously wrong. Many investigations are routine or triggered by automated data matching. Here is exactly what happens, what your rights are, and what to do first.
Types of HMRC Investigation
| Type | What it covers | How common |
|---|---|---|
| Aspect enquiry | One specific area of your return | Most common |
| Full enquiry | Entire tax return | Less common — usually signals serious concern |
| Code of Practice 8 (COP8) | Complex tax avoidance | Specialist cases |
| Code of Practice 9 (COP9) | Suspected serious fraud | Rare — HMRC’s most serious tool |
Most taxpayers who receive an enquiry face an aspect enquiry — HMRC wants to understand one specific entry on your return, such as an expense claim, rental income, or a capital gain.
How Far Back Can HMRC Investigate?
| Behaviour | Look-back period | Earliest year in scope (2026/27) |
|---|---|---|
| Innocent mistake or error | 4 years | 2022/23 |
| Careless behaviour (lack of reasonable care) | 6 years | 2020/21 |
| Deliberate non-disclosure or fraud | 20 years | 2006/07 |
The look-back period runs from the end of the tax year in question, not the filing date. HMRC must open an enquiry within 12 months of the filing deadline for returns filed on time — so for a 2024/25 return filed on 31 January 2026, HMRC can open a routine enquiry until 31 January 2027.
What HMRC’s Investigation Letter Will Say
The opening letter should tell you:
- Which tax year (or years) are under enquiry
- Whether it is an aspect or full enquiry
- What specific information or documents HMRC wants
- The deadline for your response (usually 30–60 days)
HMRC must open an enquiry formally in writing. Verbal contact or email alone does not constitute a formal enquiry opening.
What HMRC Can Ask For
HMRC can request:
- Bank statements (personal and business)
- Sales records, invoices, and receipts
- Correspondence with clients or employers
- Contracts
- Records explaining private vs business use of expenses
- Details of cash transactions
HMRC cannot demand records that do not exist — but failure to keep adequate records is itself a penalty matter. Limited companies must keep records for 6 years; sole traders for 5 years after the 31 January filing deadline for the relevant year.
How to Respond to an HMRC Enquiry
- Do not ignore it — failure to respond results in an automatic assessment by HMRC, likely unfavourable
- Read the letter carefully — note exactly what is being asked; do not volunteer additional information beyond what is requested
- Gather evidence — locate the records relevant to the specific query before responding
- Consider professional help — for anything beyond a simple factual question, a tax adviser pays for itself
- Respond by the deadline — request an extension in writing if you need more time; HMRC usually grants reasonable requests
Worked Example: An Aspect Enquiry on Rental Income
James owns a rental property and filed a Self Assessment return for 2024/25 showing rental income of £14,000 and expenses of £9,000 (net profit £5,000). HMRC opens an aspect enquiry asking James to justify the expenses.
James provides:
- Letting agent invoices (£1,200)
- Boiler repair receipt (£1,800)
- Insurance certificate (£450)
- Accountancy fee invoice (£600)
- Mortgage interest schedule (£4,950 — but Section 24 means only 20% basic rate relief is given, not a deduction)
HMRC accepts the first three items but queries whether James has correctly treated mortgage interest. The enquiry closes with an amended return — James owes an additional £340 tax plus £26 interest. No penalty is charged as the error was innocent.
Penalties Within an Investigation
If HMRC finds underpaid tax, penalties depend on behaviour:
| Behaviour | Penalty range |
|---|---|
| Innocent error | 0% (no penalty) |
| Failure to take reasonable care | 0–30% of unpaid tax |
| Deliberate under-statement | 20–70% |
| Deliberate and concealed | 30–100% |
Penalties are reduced for unprompted disclosure (you tell HMRC before they ask) and prompted disclosure (you cooperate fully once they ask). Early, full cooperation significantly reduces penalties.
Your Right to Appeal
If you disagree with HMRC’s assessment after an enquiry, you can:
- Ask for an internal HMRC review (free, handled by a different HMRC officer)
- Appeal to the First-tier Tax Tribunal (free to use, independent of HMRC)
- Seek a negotiated settlement via Alternative Dispute Resolution (ADR)
The Tribunal frequently rules in favour of taxpayers on penalty matters where HMRC’s process has not been followed correctly.
See our Self Assessment guide, what to do if you get an HMRC nudge letter, and what happens if I missed the Self Assessment deadline.