Under self-assessment tax returns are subject to the “process now check later” regime. This means that HMRC simply process your tax return based upon the figures provided unless there are any obvious mistakes which they will seek to correct immediately.
Assuming that your tax return was submitted on time then HMRC have until 31 January in the year following the deadline for submission of the tax return to open an enquiry (e.g. for the 2014/2015 tax year HMRC have until 31 January 2017 to open an enquiry).
If you are chosen for a random enquiry then HMRC will be looking for any under reporting of income or gains and also any incorrect claims or deductions.
If everything has been reported correctly on the return it is important to ensure that any response demonstrates this clearly and concisely ensuring that the enquiry is completed quickly and with minimal aggravation. Failure to do this can lead to HMRC spending considerable time looking “down blind alley’s” which could lead to the enquiry taking months if not years.
Alternatively if there have been incorrect or incomplete entries on the tax return it is important that these are quickly identified and put right. In these circumstances it is far better from a strategic point of view if you make disclosure to HMRC and again this will ensure that the enquiry is dealt with quickly and efficiently. In determining penalties HMRC will look at how you co-operated during the enquiry.
In both cases we aim to ensure that matters are dealt with quickly and promptly with correspondence kept to a minimum. This ensures that costs are kept to a minimum.