What Happens After I’ve Completed My Tax Return?

In the first post of this series, I went over some of the obligations that apply to ALL taxpayers when completing a tax return. I emphasise ALL taxpayers, because as mentioned, ALL taxpayers have a legal obligation to make a return. Also covered was what to do if there is some doubt or uncertainty over whether receipts of money (or assets representing money or easily convertible to money) have been received. So, what happens after you’ve completed a tax return?

Processing a Tax Return

The vast majority of tax returns are checked for arithmetic accuracy (by a computer) and the net result – a tax payment due or perhaps a repayment – is applied. This may require several months to process and no amount of calling to “chase” is likely to hasten the result. 

Where a taxpayer is already on HMRC’s radar as being a person of interest, the return may be “selected” for review. If that is the case, there is usually a history of dispute or uncertainty. Those historic disputes may not extend to the 2023/24 tax year (and its subsequent return), but in general, HMRC is unwilling to agree that a later year than the one(s) in dispute can be finalised without that earlier period being resolved.

Is that strictly legal? Probably not. Is it within HMRC’s “care and management” powers? Again, probably not but HMRC is never going to concede that without some form of legal action. 

Returns Under Review

Where the arithmetic check comes back with a flag or the return has an entry in respect of an HMRC campaign, then it will go to a case worker (such is the present HMRC work management plan) for review. It is likely to join a pile of returns and it may be many months before anything is heard further. 

The existence of a “white space” entry seems not to be a particular trigger for further investigation. We have instances where we have pointed out to HMRC the existence of wording in that area which the officer “has not seen”. 

There is often discussion about HMRC random testing tax returns. HMRC statements on this are ambiguous and along the lines of “we don’t usually do that but…”. My own inclination is that random testing is quite rare but may happen, especially in the high and ultra high net worth community.

Investigations into Your Tax Return

So, you’ve sent in a return and you get – months later – a simple letter from HMRC saying that they are investigating. Sometimes the letter will be specific, e.g. a small number error or transposition or a missing dividend. If the error is factual and a genuine mistake, we would usually recommend a quick response correcting the error. Normally, this will be enough to close the enquiry. There is no real threshold in terms of the quantum of the error and we have seen HMRC asking for corrections of a few pounds (and also some of more significant magnitude). 

It used to be the case that enquiries following a tax return were “informal”, that is an enquiry outside HMRC’s statutory powers. These are rarer now because often by the time the return is picked up and subject to being read by a human, the time limit for making an enquiry (12 months from submission) has closed. Therefore an enquiry under section 9A TMA 1970 arrives. These letters have a lot of official language and to be blunt are written in a  manner that assumes guilt. What that guilt may be in respect of is absent, but the tone and effect is carefully calculated to instil a little anxiety. (I’m sure HMRC would deny this, but ask a recipient of such an enquiry!)

This is when to think hard about whether you need some professional help.