Received an HMRC Letter? What to Do Next

Receiving a letter from HM Revenue & Customs (HMRC) is, for most individuals and businesses, an unsettling experience. Whether the envelope contains a routine compliance check, a formal notice of investigation, a tax assessment, or something more serious, the instinct to delay responding or to pass the matter to an accountant is both understandable and legally speaking potentially costly. This article explains the principal categories of HMRC correspondence, what each one actually means under UK tax law, the legal rights available to you, and why instructing qualified tax dispute solicitors at the earliest opportunity can be the single most important decision you make.

Why an HMRC Letter Is Never Simply Routine

HMRC correspondence is not generated at random. Every letter carries legal significance, statutory time limits, and depending on its nature real enforcement consequences if ignored or mishandled. The Taxes Management Act 1970 (TMA 1970), the Finance Acts, and the Value Added Tax Act 1994 all impose specific obligations on both HMRC and the taxpayer, including deadlines by which responses must be made and rights of appeal which expire if not exercised in time. Crucially, taxpayers regularly make the error of treating HMRC correspondence as an accounting matter rather than a legal one. Accountants can assist with tax compliance preparing returns, calculating liabilities, reconciling records but they are not lawyers. Unlike solicitors, accountants have no legal duty of confidentiality to their clients. Any information you share with your accountant can, in defined circumstances, be obtained by HMRC. Communications with a qualified solicitor, by contrast, attract Legal Professional Privilege (LPP), making them wholly confidential and protected from HMRC’s information-gathering powers. Where a serious dispute is in prospect, that distinction is not a technicality it can determine the outcome of your case

The Main Types of HMRC Letter and What Each One Means

1. Routine Compliance Check or Information Request

HMRC has broad statutory powers to request information and documents under Schedule 36 of the Finance Act 2008. A Schedule 36 notice can require a taxpayer to produce records, provide information, or attend an interview. These powers apply to both individual returns and corporate tax affairs.

Not all information requests are issued under formal notices. HMRC may write informally at first, requesting records or clarification. The temptation to respond quickly without first taking legal advice is understandable but frequently harmful. The manner in which you respond, the documents you disclose, and what you say (or fail to say) can all have significant downstream consequences if the enquiry escalates.

Even informal correspondence from HMRC should be treated seriously. If the letter relates to your self-assessment return, corporation tax, VAT, PAYE, or any other tax head, a solicitor familiar with HMRC tax investigations should review it before you respond.

2. Notice of Enquiry Into a Tax Return

Under section 9A of the TMA 1970, HMRC can open a formal enquiry into a self-assessment tax return within the relevant statutory window ordinarily 12 months from the filing date for returns filed on time, and longer where a return is filed late or where HMRC alleges fraud or negligent conduct. For corporation tax, enquiries are governed by Schedule 18 of the Finance Act 1998.

A section 9A notice is a formal statutory document. It does not mean HMRC believes you have done anything wrong; enquiries can be selected randomly or on a risk-assessed basis. However, once an enquiry is open, HMRC’s information-gathering powers are wide, and the process can extend for months or years unless actively managed.

Solicitors can engage with HMRC on your behalf throughout the enquiry process, limit the scope of information requests where they exceed what is legally permitted, and ensure your position is robustly protected. If the enquiry leads to additional assessments or penalties, formal appeal rights arise and must be exercised within strict time limits.

3. Penalty Notices and Assessments

Where HMRC considers that a taxpayer has failed to file a return on time, paid tax late, or made an inaccurate return, it may issue a penalty notice. The penalty regime under Schedule 24 of the Finance Act 2007 and Schedule 55 and 56 of the Finance Act 2009 creates different penalty categories depending on whether the behaviour was reasonable, careless, or deliberate.

The distinction between “careless” and “deliberate” conduct is pivotal. A deliberate inaccuracy can attract a penalty of up to 100% of the unpaid tax, whereas a prompted disclosure of a careless error can attract a substantially lower penalty sometimes as little as 15%. HMRC’s characterisation of behaviour is not final; it is subject to challenge both in HMRC’s internal review process and at the First-tier Tax Tribunal.

In Auxilium Project Management Ltd v HMRC [2016] UKFTT 249 (TC), the Tribunal confirmed that HMRC must establish the nature of the inaccuracy before a penalty can be upheld. Simply asserting that a return was wrong does not automatically justify a deliberate penalty. Effective representation at the penalty stage before the matter reaches Tribunal frequently achieves significant reductions or, in appropriate cases, full mitigation.

4. Code of Practice 8 and Code of Practice 9 Investigation Letters

Two of the most serious categories of HMRC investigation are governed by Code of Practice 8 (COP8) and Code of Practice 9 (COP9).

COP8 applies where HMRC suspects significant tax avoidance but has not yet formed a view that fraud has occurred. These investigations can involve complex offshore arrangements, disguised remuneration schemes, EBTs, or SDLT avoidance. They are handled by HMRC’s Fraud Investigation Service (FIS) and demand experienced legal representation from the outset. For specialist advice on tax avoidance and COP8 investigations, early legal instruction is essential.

COP9 is reserved for cases where HMRC suspects deliberate tax fraud. The taxpayer is offered the opportunity to make a full and complete disclosure through the Contractual Disclosure Facility (CDF). Acceptance of the CDF typically provides immunity from prosecution in exchange for a full, honest account of all irregularities. Rejection leads HMRC to conduct a full investigation without the benefit of the disclosure process, and criminal prosecution remains a live possibility. For further detail on tax evasion and COP9 investigations, legal representation is critical from the moment a COP9 letter arrives.

If you have received a COP8 or COP9 letter, do not speak to HMRC or your accountant until you have instructed a solicitor. The legal privilege that attaches to communications with a solicitor from the outset can be decisive.

5. HMRC Statutory Demands and Winding-Up Threats

Where HMRC believes that a tax liability is undisputed and overdue, it may serve a statutory demand as a precursor to insolvency proceedings. For companies, a statutory demand requires payment or satisfaction within 21 days. Failure to comply provides grounds for HMRC to present a winding-up petition under section 122(1)(f) of the Insolvency Act 1986 on the basis that the company is unable to pay its debts. Once a winding-up petition is advertised in the London Gazette, banks typically freeze company accounts to prevent unlawful dispositions of assets. The consequences for trading continuity and director reputation are severe and can be very difficult to reverse. Where there is a genuine dispute about the underlying liability, urgent legal steps can be taken to apply to the court to restrain advertisement and to apply for the petition to be dismissed. Time is of the essence these applications must be made before advertisement where possible. For detailed guidance on responding to a winding-up petition from HMRC, specialist legal advice should be sought immediately.

Your Legal Rights When HMRC Contacts You

One of the most important messages for any taxpayer to understand is this: receiving a letter from HMRC does not mean the matter is resolved in HMRC’s favour. You have extensive legal rights.

Right of Appeal: Most HMRC decisions including assessments, penalty notices, and rejections of claims carry a statutory right of appeal. Under section 31 of the TMA 1970, an appeal must ordinarily be lodged within 30 days of the decision. Time limits are strictly enforced, though late appeals may be permitted in certain circumstances. For guidance on late appeals to the Tax Tribunal, specialist advice is available.

Right to Request an Internal Review: Before appealing to the First-tier Tax Tribunal, taxpayers have the option to request an HMRC internal review under section 49A–49I of the TMA 1970. The review is conducted by an HMRC officer not previously involved in the decision. For advice on HMRC internal review appeals, early legal guidance is valuable.

Right to Legal Professional Privilege: As noted above, communications between a taxpayer and a qualified solicitor are legally privileged and cannot be compelled by HMRC as part of an information request or investigation. This protection is fundamental and should inform every decision about who handles your tax dispute.

Right to Challenge Disproportionate Enforcement: Where HMRC has acted unlawfully, exceeded its powers, or failed to follow its own published guidance, a judicial review may be available. The courts have intervened to quash HMRC decisions on procedural fairness grounds in cases such as R (oao Prudential plc) v Special Commissioner of Income Tax [2013] UKSC 1 and R v IRC ex parte Preston [1985] AC 835. For guidance on judicial review applications against HMRC, specialist representation is essential

The Danger of Relying on Accountants Alone

Many taxpayers particularly small business owners and company directors instinctively turn to their accountant when an HMRC letter arrives. Accountants are skilled at what they do, but their role is fundamentally different from that of a solicitor in a tax dispute context.

Accountants are not bound by Legal Professional Privilege. Their files are accessible to HMRC under Schedule 36 notices. An accountant who prepared the return that is now under investigation may have a conflict of interest in advising on the dispute and may not recognise it. They cannot provide legal advice on appeal rights, litigation strategy, or court applications. In complex investigations, where the boundary between civil and criminal exposure is not always clear, the involvement of a solicitor from the outset is not merely advisable it is, in many cases, essential.

This is not to minimise the value of good accountancy support. In tax disputes, solicitors and forensic accountants often work together with the solicitor directing strategy, managing HMRC’s information requests, and maintaining privilege over the entire process, while the accountant provides the financial analysis that supports the legal position.

What to Do If You Have Received a Letter from HMRC

The steps you take in the days and weeks following receipt of an HMRC letter can define the trajectory of your case.

Do not ignore the letter. Every category of HMRC correspondence imposes either an express or implied deadline. Missing a deadline can surrender appeal rights, attract further penalties, or be taken as evidence of a lack of cooperation which HMRC factors into penalty calculations.

Do not respond before taking legal advice. Even a well-intentioned informal response can narrow your options, disclose information you are not obliged to provide, or undermine a defence that could otherwise be maintained.

Instruct a specialist tax solicitor immediately. The earlier legal advice is obtained, the more options remain available. Privilege is established from the moment a solicitor is instructed. The firm can take over all communication with HMRC, assess the strength of HMRC’s position, advise on appeal rights and time limits, and develop a strategic response that protects your interests.

Preserve all relevant records. Tax disputes often turn on documentary evidence returns, correspondence, contracts, invoices, bank records, and supporting workings. Ensure nothing is destroyed or altered. Speak to your solicitor before deciding what to retain or disclose

How Our Tax Dispute Solicitors Can Help

At LexLaw, our team of specialist tax solicitors and barristers including lawyers with direct experience as HMRC in-house counsel and as senior advisers at the Big 4 regularly represent individuals, company directors, and businesses across the full spectrum of HMRC correspondence and dispute types. Whether you have received a routine compliance check, a formal enquiry notice, a penalty assessment, a COP8 or COP9 letter, or an HMRC statutory demand, we can provide legally privileged, commercially practical advice from the outset.

We have a track record of resolving serious HMRC tax disputes efficiently at the enquiry stage, through internal review, at the First-tier and Upper-tier Tax Tribunals, and through judicial review where appropriate. Our involvement frequently prevents disputes from escalating to the formal proceedings stage and, where proceedings are unavoidable, our clients benefit from representation by experienced tax litigators with direct knowledge of how HMRC operates from the inside. If you have a potential professional negligence claim arising from poor tax advice for example, where an accountant or tax adviser failed to advise you correctly and HMRC enforcement has followed our team can also advise on professional negligence claims against tax advisers alongside the primary tax dispute