Introduction: When That Brown Envelope Lands

There are few things more unsettling than receiving a brown envelope from HMRC — especially when it’s a notice of enquiry into your self-assessment tax return.

Even if your return was submitted correctly and on time, HMRC has the right to open an enquiry. If this happens, the key is to remain calm, understand the process, and take the right steps.

In this guide, we’ll cover:

• Why HMRC may be enquiring into your return
• What to do when you receive a notice
• Your rights during an enquiry
• How to resolve the situation efficiently

Why Has HMRC Opened an Enquiry?

HMRC investigations usually fall into one of two categories:

1. Risk-Based Enquiries

These are triggered when your return raises red flags, such as:

• Unusually high or inconsistent income or expenses
• Significant changes from previous years
• Results that differ from industry norms
• Missing data from third-party sources (e.g. banks or employers)

2. Random Enquiries

Some enquiries are chosen entirely at random. Even accurate returns can be selected — so don’t panic if this happens.

Step 1: Confirm the Enquiry Is Valid

Before responding, check whether HMRC has opened the enquiry within the legal time limits.

Things to verify:

• Was the notice issued within 12 months of your return being filed?
• Is the notice dated correctly and addressed properly?

 Note: The letter must not only be dated within the time limit — it must also be delivered within that window.

If the enquiry is late or procedurally incorrect, you may be able to challenge it and request that HMRC closes the case.

Step 2: Know Your Rights – HMRC Must Follow the Charter

HMRC must act in line with its Charter, which outlines how it must treat taxpayers.

Key principles include:

• Treating you fairly
• Acting professionally and with integrity
• Providing accurate, timely information
• Making the process as easy as possible

If HMRC acts unfairly, you can:

• Make a complaint
• Escalate the issue to the Adjudicator’s Office

Step 3: Meetings with HMRC — Your Choice

HMRC may request a meeting as part of their enquiry, but you’re not legally required to attend for standard tax return investigations.

If you do agree to a meeting:

• Ask for a written agenda in advance
• Hold it at your accountant’s office or another neutral location
• Prepare carefully with your adviser

️ A well-handled meeting can speed up the process. But a rushed or unprepared one can lead to complications.

 Step 4: Resolving Disputes – Use Alternative Dispute Resolution (ADR)

If you and HMRC cannot agree on the facts or tax treatment, you might benefit from Alternative Dispute Resolution (ADR).

ADR involves:

• A neutral mediator from HMRC (who hasn’t worked on your case)
• A focus on resolving matters fairly and quickly
• The ability to withdraw at any stage

ADR is especially useful when:

• There’s a breakdown in communication
• Technical disagreements arise
• You want to avoid escalating to a tribunal

Learn more: HMRC’s ADR Manual

 Step 5: Request a Closure Notice If It Drags On

Some enquiries — particularly those involving property or self-employment — can stretch out for months or even years.

If HMRC hasn’t made any real progress, you can apply to the First-tier Tribunal for a closure notice, which legally forces HMRC to:

• Either close the enquiry, or
• Justify why more time is needed

This step can be a powerful way to move things forward.

 Practical Tips for Handling an HMRC Enquiry

1. Get Professional Advice Early

If ever there’s a time to call an accountant, this is it. Many accountancy firms also offer fee protection insurance that covers the costs of dealing with enquiries.

2. Respond Calmly and Promptly

Don’t ignore the notice. Answer any requests on time. If you’re unsure, let your accountant handle the communication.

3. Gather All Relevant Records

This may include:

• Bank statements
• Invoices and receipts
• Tenancy agreements
• Notes on income and expenses

4. Be Consistent

Make sure any explanations align with the documents you provide. Avoid estimates unless absolutely necessary.

 What Happens at the End of the Enquiry?

Once the enquiry concludes, HMRC will issue either:

• A Closure Notice, confirming the outcome
• An Amendment, if they believe extra tax is due (with possible interest or penalties)

You can appeal any decision you disagree with.

Penalties may be reduced or waived if you’ve:

• Acted honestly and cooperatively
• Provided full information
• Voluntarily corrected errors

 Real-Life Example

Case: A Landlord Faces Scrutiny

Jay, a landlord with three properties, submitted his return as normal. HMRC raised concerns over his high repair expenses.

They requested supporting evidence. Jay’s accountant compiled all relevant invoices, bank statements, and a detailed explanation.

Outcome: HMRC accepted the records and closed the enquiry with no changes to Alex’s return.

Lesson: A calm, well-prepared response can save time, money, and stress.

 Final Thought: An Enquiry Isn’t the End — It’s a Process

Just because HMRC opens an enquiry doesn’t mean you’ve done anything wrong. But how you respond can shape the outcome.

Stay organised, understand your rights, and seek professional help early. That approach can turn a potentially stressful situation into a manageable one.

 Worried About an HMRC Enquiry? Filing Accounts Can Help

At #Filing Accounts, we specialise in helping individuals and businesses handle HMRC enquiries with confidence.

We offer:

• Expert guidance on responding to HMRC
• Direct liaison with HMRC on your behalf
• Support through ADR or tribunal if needed