Schedule 18 Finance Act 1998 compliance check
HMRC Corporation Tax Enquiry Help in Leicester
If you are based in Leicester or elsewhere in East Midlands and have received HMRC correspondence relating to a Corporation Tax Enquiry, the process you'll go through is set by national HMRC procedure rather than local variation — but the specialists supporting you can still bring genuinely local context to your case.
Typical deadline: HMRC can normally only open an enquiry within 12 months of an on-time filing; once opened, the notice itself sets your specific response deadline.
Understanding this Corporation Tax case
At a glance
- The standard enquiry window is 12 months from an on-time filing, though late or amended returns extend this
- Capital allowances categorisation is one of the most frequently tested areas of a Corporation Tax return
- Group companies face additional scrutiny on transfer pricing and intercompany loan relationships
- Group relief claims are checked against ownership and loss-surrender conditions between companies
- A closure notice ends the enquiry and starts the clock on any appeal deadline
- Well-organised supporting workings from the outset generally shorten the overall enquiry
A Corporation Tax enquiry, opened under Schedule 18 of the Finance Act 1998, examines whether a company's Corporation Tax return correctly reflects its profits, deductions and reliefs claimed. HMRC's enquiry window generally runs for twelve months from the date a return is filed on time, though this can extend where a return is filed late or amended, and the opening notice sets out the initial scope, which can range from a single specific deduction to a full review of the company's tax computation. Common areas of focus include the treatment of specific expenses, capital allowances claimed on plant and machinery, group relief surrendered or claimed between companies, and the treatment of intercompany transactions and loan relationships.
Where a company is part of a group, HMRC often examines transfer pricing between connected companies, checking that transactions are priced on an arm's-length basis consistent with what unconnected parties would have agreed, and that any group relief claimed correctly reflects the ownership and loss-surrender conditions between the companies involved. Loan relationships between group companies, including the interest rates charged and whether debt is genuinely on commercial terms, are another area that regularly attracts detailed questions, particularly where the lending company is based in a lower-tax jurisdiction.
Capital allowances claims are frequently tested in detail, since correctly categorising expenditure between the main pool, special rate pool, and potentially qualifying for the Annual Investment Allowance or full expensing depends on the specific nature of the asset and how it's used in the business. HMRC may ask for a detailed breakdown of capital expenditure with supporting invoices, particularly where a claim includes an element of building fit-out or integral features, since these categories have historically been a common area of both genuine complexity and inadvertent over-claiming.
A Corporation Tax enquiry concludes with a closure notice, either confirming the return was correct or setting out HMRC's amendment, and the same appeal routes — statutory review and the First-tier Tribunal — apply as for other HMRC decisions. Where multiple accounting periods or group companies are involved, enquiries can run considerably longer than a straightforward single-company case, and keeping a clear, well-organised set of supporting workings from the outset generally shortens the overall process considerably.
How to prepare for a Corporation Tax case
A few focused steps before you respond can make the whole process smoother.
- 1
Identify exactly which part of the return the opening notice covers
- 2
Reconcile the tax computation against the statutory accounts for the period
- 3
Gather capital allowances workings with supporting invoices for the assets claimed
- 4
For group companies, prepare transfer pricing and intercompany loan documentation
- 5
Check group relief claims against the ownership and surrender conditions applying at the time
- 6
Organise supporting workings clearly before responding, rather than providing them piecemeal
HMRC enquiries in Leicester
Leicester has a long-standing textiles and garment manufacturing sector alongside significant food production and logistics activity, supported by a large and diverse population of independent traders and family-run businesses. The textiles sector has historically drawn HMRC attention around cash payments, agency labour and undeclared workers, making payroll and PAYE record-keeping a particularly sensitive area locally. Food production and logistics businesses in the city more often face questions around stock valuation, waste and VAT on supply chains. Specialists working with Leicester businesses generally place early emphasis on getting payroll and worker-status records in order before responding to HMRC.
What documentation to gather before you respond
- The Corporation Tax computation and statutory accounts for the period
- Capital allowances workings with supporting invoices for the assets claimed
- Group relief claims with evidence of ownership and surrender conditions
- Transfer pricing documentation for intercompany transactions, if applicable
- Loan relationship agreements and interest rate benchmarking for group loans
- A note of exactly which part of the return the enquiry covers
Common mistakes to avoid
Responding only to the specific figure mentioned in the opening notice, prompting broader follow-up questions
Categorising capital expenditure into the wrong pool without a clear, evidenced basis
Assuming intercompany loans are on commercial terms without benchmarking the interest rate
Claiming group relief without checking the ownership and surrender conditions were genuinely met
Not reconciling the tax computation to the statutory accounts before HMRC raises the discrepancy
Letting an enquiry into one accounting period overlook a similar issue in an adjacent period
What happens after you respond
HMRC reviews the tax computation, accounts and workings provided in response to the opening notice
Further questions may follow on specific deductions, allowances or group transactions
For group companies, transfer pricing and loan relationship terms may be tested in detail
HMRC sets out any proposed adjustment, explaining its reasoning
You can agree, negotiate or formally dispute any proposed change
The enquiry closes with a closure notice, confirming the return or setting out the amendment
Frequently asked questions about a Corporation Tax case
How long does HMRC have to open a Corporation Tax enquiry?
Generally 12 months from the date a return is filed on time, though this window extends where a return is filed late or subsequently amended.
What areas does HMRC commonly focus on in a Corporation Tax enquiry?
Frequent areas include capital allowances categorisation, group relief claims, intercompany loan relationships, and transfer pricing between connected companies.
What is transfer pricing and why does it matter?
It's the pricing of transactions between connected companies, which HMRC expects to reflect what unconnected parties would have agreed on an arm's-length basis, particularly relevant for groups with companies in different tax jurisdictions.
Can group relief be challenged during an enquiry?
Yes, if HMRC finds the ownership or loss-surrender conditions between the companies weren't genuinely met, the relief claimed can be restricted or denied.
How are capital allowances tested in an enquiry?
HMRC typically asks for a detailed breakdown of capital expenditure with supporting invoices, checking that assets have been categorised correctly between the main pool, special rate pool, and any allowances claimed.
How should I prepare for a Corporation Tax enquiry?
Preparation is largely about reconciling your own figures before HMRC's questions arrive.
- Reconcile the tax computation against the statutory accounts
- Gather supporting invoices for any capital allowances claimed
- Prepare transfer pricing or loan documentation if group companies are involved
- Confirm group relief conditions were met for the period
What records will HMRC ask for?
Most Corporation Tax enquiries draw on a similar core set of records.
- The tax computation and statutory accounts
- Capital allowances workings and supporting invoices
- Group relief claims and ownership evidence
- Loan agreements and transfer pricing documentation, where relevant
Can a Corporation Tax enquiry cover more than one accounting period?
An enquiry is generally opened into a specific period, but if it uncovers a similar issue, HMRC can also examine adjacent periods or use discovery provisions for earlier years in some circumstances.
What happens if HMRC and the company can't agree on an adjustment?
The enquiry closes with a closure notice setting out HMRC's position, which can then be challenged through a statutory review or the First-tier Tribunal.
Does a Corporation Tax enquiry affect a company's ability to file future returns?
No, an ongoing enquiry into one period doesn't prevent normal filing obligations for other periods, which should continue as usual.
Speak to a specialist about your Corporation Tax Enquiry
Confidential, no-obligation first conversation.
Your enquiry
Topic: Corporation Tax Enquiry
Area: Leicester, East Midlands