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 opens enquiries into about 5-7% of Corporation Tax returns. Some are random, most are triggered by specific indicators.

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