As the Self-Assessment deadline of January 31 looms ever closer, it’s a prudent moment to revisit the time constraints governing HMRC inquiries. These statutory timelines are crucial for both taxpayers and HMRC to understand their rights and obligations:
For individuals, Section 9A of the Taxes Management Act 1970 outlines the relevant time limits.
For partnerships, the reference is Section 12AC of the Taxes Management Act 1970.
Companies, on the other hand, must refer to Schedule 18 Paragraph 24 of the Finance Act 1998.
In broad strokes, HMRC’s window to initiate an inquiry is typically 12 months from the date of return submission. However, if a return is filed late or amended, this window extends to the quarter day following the return’s filing anniversary, specifically on January 31, April 30, July 31, or October 31.
For instance, if you submit your 2023 Self-Assessment return to HMRC on November 30, 2023, the inquiry window remains open until November 29, 2024. If the 2023 return is filed late, say on March 1, 2025, the inquiry window extends until March 31, 2025, corresponding to the quarter day after the filing date of April 30, 2024.
This is where the Let Property Campaign becomes relevant. If you have rental income from properties and haven’t declared it accurately or in a timely manner, you could be at risk of an HMRC inquiry. The Let Property Campaign provides an opportunity to correct your tax affairs related to rental income and minimize the risk of penalties or interest charges. It’s essential for individuals with such income to be aware of these regulations and take proactive steps to ensure compliance with tax laws, thereby avoiding potential HMRC inquiries and their associated consequences.
When HMRC launches an inquiry, they should clearly state the legislation justifying it. While some inquiries occur randomly without specific concerns, most are based on predetermined selection criteria. In such cases, HMRC may not disclose the exact nature of their concerns. It’s vital for taxpayers to understand that HMRC possesses an extensive amount of data and intelligence. With HMRC’s Connect Systems housing around 55 billion data points, including information from sources like credit and debit card accounts, Land Registry, Airbnb, property websites, Google Street View, council tax records, and the electoral roll, the odds are high that they have access to pertinent information.
The list is not exhaustive, as numerous other sources contribute to their vast knowledge. When you receive an inquiry letter from HMRC, it indicates they possess information that raises doubts about the accuracy of your return. Although occasional inaccuracies can be uncovered, they are typically well-informed.
The HMRC inquiry framework is firmly established and supplemented by Compliance Checks, conducted using Schedule 36 of the Finance Act. While the lines between inquiries and checks may sometimes blur, consulting the relevant legislation can help ensure that HMRC is acting within its powers.
Therefore, before signing and submitting your tax return declaration, it is prudent to pause and verify its completeness. In cases of uncertainty, seeking a second opinion is a valuable step to take. Neglecting this could result in protracted inquiries, potentially leading to interest and penalties for undeclared tax liabilities.
If you have any further queries on this subject please reach out to us at 01902 711370 or email enquiries@uklandlordtax.co.uk if you have any questions or require our expert assistance.
