The procedures relating to compliance checks, appeals and disputes

Q: What is HMRC's deadline to open a compliance check if a tax return is filed on or before the due date?

HMRC has 12 months from the date the return was actually filed .

Q: What is the time limit for HMRC to start a compliance check if a tax return is filed late?

HMRC has until the quarter day following the first anniversary of the date the return was actually filed.

Q: What are the time limits for HMRC to make a discovery assessment based on taxpayer behaviour?

The time limits from the end of the relevant tax year are 4 years for innocent errors, 6 years for careless errors, and 20 years for deliberate errors (fraud).

Q: Within what time limit must a taxpayer make a formal appeal against an HMRC decision or assessment?

The appeal must be made in writing to HMRC within 30 days of the date on the notice.

Q: What types of matters can be decided by the First-tier Tribunal versus the Upper Tribunal?

The First-tier Tribunal can decide on matters of both fact and law , whereas the Upper Tribunal only hears appeals on a point of law .

Taxation (TX) · ACCA · 5 min read · Updated: Nov 2, 2026

Welcome to Compliance and Appeals!

Hello there! You’ve already learned how to calculate tax and when to submit those returns. But what happens if HM Revenue & Customs (HMRC) wants to double-check the numbers? Or what if you disagree with a decision they’ve made?

In this chapter, we look at the "rules of the game" for compliance checks (HMRC’s way of checking your work) and the appeals process (your way of challenging them). Think of this as the "law and order" section of the UK tax system. Don’t worry if it seems a bit technical at first—we’ll break it down step-by-step!

1. HMRC Compliance Checks (Enquiries)

HMRC doesn't just take every tax return at face value. They have the power to check any return to ensure the right amount of tax is being paid. This is officially called a Compliance Check.

How and Why does HMRC start a check?

HMRC doesn't need a specific reason to start a check. It could be a random selection (like a spot check) or a risk-based selection (if your numbers look unusual compared to previous years or industry standards).

The Time Limits (The "Window" for Checks)

HMRC cannot wait forever to start a check. There is a specific "window" they must stick to. This is a very popular exam topic!

If the return was filed on time: HMRC has 12 months from the date the return was actually filed to start a check.

If the return was filed late: HMRC has until the quarter day following the first anniversary of the day the return was filed. The quarter days are 31 January, 30 April, 31 July, and 31 October.

Example: If Joe files his 2025-26 return on 1 December 2026 (on time), HMRC has until 1 December 2027 to start a check.

What can HMRC check?

HMRC can check anything relevant to establishing the person's tax position and verifying the figures submitted on the tax return.

Quick Review:

Standard Window: 12 months from filing (if on time).
HMRC Power: They can check anything relevant to the tax liability.
Notice: HMRC must give written notice that they are starting a check.

2. Determinations and Discovery Assessments

Sometimes, HMRC has to take the lead if a taxpayer isn't cooperating or if new information comes to light late in the day.

HMRC Determinations

If a taxpayer fails to file a tax return by the deadline, HMRC can't wait forever for the tax. They will issue a Determination. This is essentially HMRC’s "best guess" of what you owe.

Key Rule: You cannot "appeal" a determination. The only way to displace it is to file the actual tax return. This must be done within 3 years of the original filing date.

Discovery Assessments

What if the 12-month window for a check has closed, but HMRC later "discovers" that tax has been underpaid? They can issue a Discovery Assessment to collect the missing tax.

However, they can only do this if the underpayment was due to careless or deliberate behavior, or if the taxpayer didn't provide enough information for HMRC to spot the error earlier.

Time Limits for Discovery Assessments:

Innocent Error: 4 years from the end of the tax year.
Careless Error: 6 years from the end of the tax year.
Deliberate Error (Fraud): 20 years from the end of the tax year.

Memory Aid: Think of the 4-6-20 rule. 4 for "oops," 6 for "clumsy," and 20 for "on purpose!"

3. The Appeals Process and the Tribunals

If you disagree with an assessment, an amendment following an enquiry, or a penalty HMRC has issued, you have the right to challenge it.

Step 1: The Notice of Appeal

You must appeal in writing to HMRC within 30 days of the date on the notice (e.g., the penalty notice or assessment), stating the grounds of appeal.

Step 2: Internal Review

Following an appeal, HMRC may offer an internal review (or the taxpayer can request one). An independent HMRC officer who was not involved in the original decision reviews the case. This is relatively quick and free. If the taxpayer does not agree with the review outcome, they can proceed to a tribunal.

Step 3: The Tax Tribunals

The UK has a two-tier tax tribunal system independent of HMRC:

1. First-tier Tribunal:

Hears appeals directly from taxpayers where an agreement cannot be reached with HMRC, or following an internal review.
Can decide on matters of both fact and law.

2. Upper Tier Tribunal:

Hears appeals against decisions made by the First-tier Tribunal.
Can only consider appeals on a point of law (not disputes over questions of fact).
Requires permission (leave to appeal) from either the First-tier Tribunal or the Upper Tier Tribunal.

Paying Tax During an Appeal

Don't worry if this seems unfair... but usually, you are expected to pay the tax even while you are appealing. However, you can apply for a postponement of some or all of the tax if you believe you have been overcharged. If you lose the appeal, you’ll have to pay interest on any unpaid tax.

Did you know? Most tax disputes are settled by agreement with HMRC before they ever reach a Tribunal hearing. It's often cheaper and less stressful for both sides!

4. Common Pitfalls and Tips

Common Mistake: Students often think you have 12 months from the deadline to start an enquiry. Remember: It's 12 months from the date the return was actually filed (if filed on time).

Key Takeaway Summary:
- Enquiry Window: 12 months from actual filing if on time; quarter day after the first anniversary if late.
- Determinations: HMRC's estimate when no return is submitted. Displaced only by filing the actual return within 3 years.
- Discovery: 4, 6, or 20 years depending on taxpayer behaviour.
- Appeals: 30-day deadline to appeal in writing to HMRC.
- First-tier Tribunal: Decides disputes of fact and law.
- Upper Tier Tribunal: Hears appeals from the First-tier Tribunal on points of law only.

Quick Math Check:

If an assessment is for \( £5,000 \) and the taxpayer thinks only \( £2,000 \) is due, they can apply to postpone the remaining \( £3,000 \) while the appeal is heard.

Encouragement: You’re doing great! This chapter is all about timelines and procedures. If you can remember the 12-month enquiry window, the 30-day appeal limit, the 4/6/20 year discovery limits, and the roles of the First and Upper Tier Tribunals, you are well on your way to acing this part of the TX exam!

References

ACCA TX-UK Syllabus and Study Guide June 2026 to June 2027 — ACCA
ACCA TX-UK Finance Act 2025 Article — ACCA

Quick check

Can you answer these now?

Open each question to check the key ideas from this chapter.

On what basis can HMRC decide to start a compliance check on a tax return?

HMRC does not need a specific reason; they can select a return based on random selection or risk-based selection.

What is HMRC's deadline to open a compliance check if a tax return is filed on or before the due date?

HMRC has 12 months from the date the return was actually filed.

What is the time limit for HMRC to start a compliance check if a tax return is filed late?

HMRC has until the quarter day following the first anniversary of the date the return was actually filed.

What is an HMRC determination and how can a taxpayer displace it?

An HMRC determination is an estimate of tax owed issued when no return has been filed; it can only be displaced by filing the actual return within 3 years of the original filing deadline.

What are the time limits for HMRC to make a discovery assessment based on taxpayer behaviour?

The time limits from the end of the relevant tax year are 4 years for innocent errors, 6 years for careless errors, and 20 years for deliberate errors (fraud).

Within what time limit must a taxpayer make a formal appeal against an HMRC decision or assessment?

The appeal must be made in writing to HMRC within 30 days of the date on the notice.

What is an HMRC internal review in the context of a tax dispute?

An internal review is an optional, quick, and cost-free process where an independent HMRC officer not involved in the original decision reviews the case.

What types of matters can be decided by the First-tier Tribunal versus the Upper Tribunal?

The First-tier Tribunal can decide on matters of both fact and law, whereas the Upper Tribunal only hears appeals on a point of law.

Is a taxpayer required to pay disputed tax while an appeal is ongoing?

Yes, tax is generally payable during an appeal unless the taxpayer applies for and is granted a postponement.

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