Business Clinic: How should I respond to HMRC inquiry letter?
© Alphotographic/iStockphoto Whether it’s a legal, tax, finance or management question, Farmers Weekly’s expert panel can help. Here, Kate Bell, a partner in Albert Goodman’s farms and estates team, advises on how to approach an HMRC inquiry.
See also: Business Clinic: Can you advise on farm’s business structure?
About the author
Kate Bell is a partner in accountant Albert Goodman’s farms and estates team.
She has a family farming background in agriculture and is a chartered accountant with over 16 years’ experience, delivering significant tax savings for farming families through her specialist knowledge of agricultural income tax, capital gains tax, and inheritance tax reliefs.
Kate works closely with farming families of all sizes and sectors, helping them plan for the long term, including guiding families through succession.
Q: I am a sole trader farmer and have just received a letter from HMRC opening an inquiry into my tax return for the year ended 5 April 2025. They have requested a lot of information and I am very anxious about what this means and why they have picked me.
Cash is tight and I want to do as much as I can myself but I do not want to provide anything I should not. Do I need to pay my accountant to deal with this, or is it something I can do myself? Have you got any top tips?
A: First, well done for opening the brown envelope, reading the letter and seeking advice. Receiving a tax enquiry can be worrying, but it is important not to panic.
An HMRC inquiry does not necessarily mean you have done anything wrong. Every taxpayer who submits a tax return can be selected for review.
Some inquiries arise because of a specific issue, while others are opened as part of HMRC’s routine compliance checks. It is entirely possible that HMRC will conclude that everything is correct, or even that a tax repayment is due.
HMRC is expanding its compliance teams with increased funding established in the 2025 Budget. Reports suggest they are on track to recruit and train 5,500 new compliance caseworkers by 2030.
HMRC notice of inquiry
The inquiry letter may explain why your tax return has been selected. For farmers, this can sometimes be linked to matters such as farming losses or unusual figures within the return, for example large fluctuations in income or expenditure
HMRC may request supporting records, including:
- Bank statements
- Details of income and expenditure
- Tax adjustments
- Capital allowance computations
- Drawings and capital introduced
Do not ignore the deadline in the letter. If you cannot provide the information in time, contact the investigating officer as soon as possible. In many cases, they will agree to extend the deadline if you explain the circumstances.
If you have health issues or personal circumstances that make dealing with the inquiry difficult, HMRC can provide additional support and this information is normally explained within the letter.
Responding to HMRC
Obtaining specialist advice can be valuable. Occasionally HMRC requests information it is not entitled to receive or opens an inquiry outside the permitted time limits. An experienced adviser can identify such issues and challenge HMRC where appropriate.
Even straightforward inquiries can be time-consuming and may lead to significant professional fees. Before instructing your accountant, check whether you have tax investigation cover through your accountant or insurer.
This is often available for a relatively small annual premium and can cover the professional costs of dealing with HMRC on your behalf.
If you have this cover through your accountant, you may simply be able to pass the inquiry to them to manage. If the cover is provided by an insurer, contact them as soon as possible.
However, within self-assessment you can of course go back to HMRC yourself to provide the information they require but you should try and provide everything in one go in a clear and concise format in order to assist the investigating officer to undertake the checks.
This will help the investigating officer complete their review more efficiently and may speed up the inquiry. You should not be concerned about providing anything you shouldn’t as long as everything has been done in good faith.
HMRC will often accept information by email, provided you have agreed to the associated security risks. Whichever method you use, always include the inquiry reference number on all correspondence to ensure it is linked to the correct case.
Top tips
- Do not ignore the inquiry letter
- Check whether you have tax investigation cover
- Speak to your accountant before responding
- Contact HMRC if you need more time
- Keep communication clear, organised and professional
- Include the inquiry reference on all correspondence.
In summary, if you have tax investigation cover, let your accountant or insurer manage the process. If not, you can either appoint your accountant to act for you or respond yourself. Whatever route you choose, good communication with both HMRC and your advisers will help the inquiry progress as smoothly and quickly as possible.
Do you have a question for the panel?
Outline your legal, tax, finance, insurance or farm management question in no more than 350 words and Farmers Weekly will put it to a member of the panel. Please give as much information as possible.
Email your question to FW-Businessclinic@markallengroup.com using the subject line “Business Clinic”.
