HMRC Enquiry Into Your Corporation Tax Return: What to Expect

HMRC Enquiry Into Your Corporation Tax Return: What to Expect

HMRC can open an enquiry into any CT600. Here's what triggers them, what happens, and how to respond.

How Common Are Enquiries?

HMRC doesn't publish data on how many Corporation Tax returns it enquires into each year. Some enquiries are random; most are triggered by specific indicators in the return.

What Triggers an Enquiry?

Common Triggers

• Large or unusual expenses — especially entertaining, travel, or consultancy fees
• Significant year-on-year changes — profit dropping sharply or expenses spiking
• Industry comparisons — your margins are very different from similar companies
• Cash businesses — restaurants, shops, trades
• R&D claims — HMRC has a dedicated team checking these
• Connected party transactions — payments to directors, family members, related companies
• Late or amended returns — filing late or making corrections can flag you
• Random selection — some enquiries are purely random

Less Common Triggers

• Tip-offs from ex-employees, competitors, or partners
• Cross-referencing with other tax data (VAT, PAYE, personal returns)
• Information from overseas tax authorities

The Enquiry Process

1. Opening Letter

HMRC sends a formal letter opening the enquiry. They must open it within 12 months of the filing date (or 12 months of an amendment).

The letter will state whether it's a:

• Full enquiry — reviewing the entire return
• Aspect enquiry — looking at specific items

2. Information Requests

HMRC will ask for documents and explanations:

• Accounts and working papers
• Bank statements
• Invoices and receipts
• Contracts with customers/suppliers
• Details of specific transactions

You have 30 days to respond (though extensions are usually granted).

3. Meetings (Sometimes)

HMRC may request a meeting. You can bring your accountant or tax advisor. You're not obligated to attend — you can respond in writing.

4. Resolution

The enquiry ends with one of:

• No change — HMRC accepts the return as filed
• Agreement — you agree to adjustments and pay additional tax + interest
• Assessment — if you disagree, HMRC issues a closure notice and you can appeal

Your Rights

1. Right to representation — you can appoint an accountant or tax advisor
2. Right to appeal — if you disagree with HMRC's conclusions
3. Right to a closure notice — you can apply to the Tax Tribunal if HMRC drags the enquiry on unreasonably
4. Right to confidentiality — HMRC can't discuss your affairs with third parties
5. Right to complain — via HMRC's complaints process or the Adjudicator's Office

Penalties

If HMRC finds inaccuracies:

Voluntary disclosure always reduces penalties.

How to Prepare

1. Keep good records — 6 years of invoices, receipts, bank statements
2. Document decisions — note why you treated items as you did
3. File on time — late filing increases scrutiny
4. Be consistent — sudden changes in accounting treatment attract attention
5. Get professional help — if an enquiry opens, involve an accountant immediately

Time Limits

File your CT600 accurately the first time. Use Taxpipe — we validate your figures and flag potential issues before you submit. £59.

Related Reading

• How to Use HMRC Government Gateway to File Your CT600
• CT600 Nil Return: How to File When Your Company Has No Trading Activity
• Company Formation & Corporation Tax Registration