HMRC Enquiry Into Your CT600: What to Expect and How to Respond

HMRC Enquiry Into Your CT600: What to Expect and How to Respond

Getting a letter from HMRC saying they're opening an enquiry into your company tax return is alarming. But it's not as scary as it sounds — and knowing the process helps you respond effectively.

Here's a practical guide to HMRC CT600 enquiries: why they happen, what to expect, and what to do.

What Is an HMRC Enquiry?

An HMRC enquiry (officially a "compliance check") is a formal review of your CT600 company tax return. HMRC has the legal right to check any return to make sure the figures are correct and the right amount of tax has been paid.

There are two types:

Aspect enquiry

HMRC looks at one specific area of your return — perhaps your R&D claim, a large expense, or a particular disclosure. This is the most common type for small companies.

Full enquiry

HMRC reviews your entire return and underlying records. This is less common and usually triggered by specific concerns.

What Triggers an Enquiry?

Random selection

HMRC selects a proportion of returns at random. Being selected doesn't mean you've done anything wrong — it's part of their compliance programme.

Risk indicators

HMRC's computer systems flag returns that show unusual patterns:

• Sudden drop in profits compared to previous years
• Unusually high expenses relative to turnover
• Large director's remuneration in a low-profit year
• R&D tax credit claims (these are checked more frequently)
• Inconsistencies between your CT600 and other HMRC data (VAT returns, PAYE, CIS)
• Industry benchmarks — if your margins are significantly different from similar businesses
• Connected party transactions — trading with related companies

Third-party information

HMRC receives data from banks, other tax authorities, and public sources. If this data doesn't match your return, it may trigger an enquiry.

Late or amended returns

Returns filed late, or returns that are amended shortly after filing, attract more attention.

The Enquiry Timeline

The 12-month window

HMRC must open an enquiry within 12 months of the filing date (or the amendment date, if you amended your return). After this window closes, HMRC can only reopen your return if they discover:

• Deliberate tax fraud
• A careless error (4-year window)
• New information showing lost tax (4-year window)

What HMRC Can Ask For

During an enquiry, HMRC can request:

Documents

• Accounts and financial statements
• Bank statements (company accounts)
• Invoices and receipts for expenses claimed
• Contracts with customers and suppliers
• Board minutes relating to financial decisions
• Tax computations and working papers

Explanations

• Why certain expenses were claimed
• How you calculated specific figures
• The business purpose of particular transactions
• Details of connected party transactions
• How you determined the tax treatment of specific items

What HMRC CANNOT do

• Demand personal bank statements (without a specific legal reason)
• Enter your premises without permission (unless they have a warrant)
• Force you to attend a meeting (you can respond in writing)
• Keep the enquiry open indefinitely (you can apply for closure)

Your Rights

You have important legal rights during an enquiry:

1. Right to representation

You can appoint an accountant, tax adviser, or solicitor to deal with HMRC on your behalf. HMRC will communicate with your representative if you authorise them.

2. Right to know the scope

HMRC must tell you what they're looking at. For an aspect enquiry, they should specify which area of your return is being reviewed.

3. Right to a reasonable timeframe

HMRC should give you at least 30 days to respond to information requests. If you need more time, you can negotiate an extension.

4. Right to apply for closure

If HMRC is taking too long, you can apply to the First-tier Tribunal to direct HMRC to close the enquiry. HMRC must then either close it or justify why it needs to continue.

5. Right to appeal

If HMRC's conclusion results in additional tax, you can:

• Request an internal review by a different HMRC officer
• Appeal to the First-tier Tribunal (independent)
• Negotiate a settlement

How to Respond: Step by Step

Step 1: Don't panic

An enquiry letter is stressful but routine. Thousands of companies receive them every year. Most result in minor adjustments or no change at all.

Step 2: Read the letter carefully

Identify:

• Is it an aspect or full enquiry?
• Which specific areas are they asking about?
• What documents do they want?
• What's the deadline for your response?

Step 3: Consider getting professional help

If you don't have an accountant, consider engaging one now. An experienced tax adviser knows HMRC's processes and can often resolve enquiries faster.

If the amounts involved are small and the query is straightforward, you may be comfortable handling it yourself.

Step 4: Gather your records

Collect everything HMRC has asked for. Organise it clearly — well-presented records make a good impression and speed up the process.

Step 5: Respond within the deadline

Answer HMRC's questions directly and factually. Don't volunteer information they haven't asked for, but don't be evasive either.

Step 6: Keep copies

Keep copies of everything you send to HMRC, and note the dates you sent them.

Possible Outcomes

No change

HMRC is satisfied your return is correct. They close the enquiry with no adjustment. This happens more often than you'd think.

Minor adjustment

HMRC identifies a small error — perhaps an expense that shouldn't have been claimed, or a timing difference. You pay the additional tax plus interest. No penalties if the error was innocent.

Penalties

If HMRC finds that you were careless or deliberate in making errors:

• Careless errors: Penalty of 0-30% of the additional tax
• Deliberate errors: Penalty of 20-70% of the additional tax
• Deliberate and concealed: Penalty of 30-100% of the additional tax

Penalties are reduced for:

• Telling HMRC about the error (unprompted disclosure)
• Helping HMRC understand what happened
• Giving access to records promptly

Settlement

For larger adjustments, HMRC may offer a settlement — an agreed figure covering additional tax, interest, and penalties. Settling avoids the cost and stress of tribunal proceedings.

How to Minimise Enquiry Risk

1. File on time

Late returns attract attention. File your CT600 well before the deadline.

2. Keep good records

The better your records, the easier it is to answer HMRC's questions — and the more likely the enquiry closes quickly.

3. Be consistent

Sudden changes in profit levels, expense patterns, or business activities are red flags. If there's a genuine reason (COVID, lost client, new contract), document it.

4. Claim only legitimate expenses

Don't claim personal expenses through the company. HMRC cross-references data and spots discrepancies.

5. Get your CT600 right first time

Errors and amendments attract scrutiny. Using reliable filing software reduces mistakes.

Taxpipe's guided wizard walks you through every CT600 box with plain-English explanations, reducing the chance of errors that trigger enquiries. File your CT600 correctly the first time — just £59.

Enquiry Insurance

Some accounting firms offer tax investigation insurance (also called fee protection insurance). This covers the professional fees of dealing with an HMRC enquiry.

Typical cost: £100-£300 per year for a small company.

Whether it's worth it depends on your risk tolerance. If you're a straightforward small company with clean records, the risk is low. If you have complex affairs or claim R&D relief, it might be worth considering.

Related Articles

• HMRC Rejected Your CT600? Common Errors and How to Fix Them

Frequently Asked Questions

How common are CT600 enquiries?

HMRC opens enquiries into roughly 2-5% of corporation tax returns each year. The rate is higher for R&D claims.

Can I refuse to provide information?

You can refuse unreasonable requests, but HMRC can issue a formal information notice requiring you to comply. Failure to comply is a criminal offence.

Will the enquiry delay my refund?

If you're due a refund, HMRC may withhold it during an enquiry. However, you can ask them to release undisputed amounts.

How long do enquiries take?

Simple aspect enquiries: 3-6 months. Complex or full enquiries: 12-18 months or longer.

Can HMRC go back more than 12 months?

The 12-month window is for opening a routine enquiry. For careless errors, HMRC has 4 years. For deliberate errors, 20 years. For fraud, there's no time limit.

Should I worry about an enquiry if my return is correct?

No. If your return is accurate and you have records to support it, an enquiry is an inconvenience, not a threat. Cooperate, provide what's asked, and it will close.

The best defence against HMRC enquiries? An accurate CT600 filed correctly from the start. File with Taxpipe — guided entry, built-in validation, just £59.