A tax enquiry is where HMRC will check your tax affairs in detail to see if they are correct and complete. They will ask questions about your tax return, they will request and review your records and they may request a meeting. HMRC have the right to open a tax enquiry into any return.
The enquiry may be a full enquiry into the whole tax return or may be an aspect enquiry into a particular part of it.
It is important that any information you give HMRC is accurate as you could be penalised for giving any false information.
Your tax return may be picked at complete random or may be picked because it represents a higher level of risk because of the type of work you do or your different types of income.
HMRC normally has 12 months from the date your return was filed to open up a tax enquiry (15 months if you filed after the return deadline).
If HMRC considers that something in your return is wrong but you have not been negligent, then they will request that it is corrected. If you do not amend it yourself they may automatically do it for you. You will have to pay any additional tax and interest on what was underpaid.
If HMRC finds that you have been neglectful or fraudulent, then they will want to charge penalties as well as the extra tax and interest.
If you are unable to agree with HMRC then you can appeal against this to the First Tier Tax Tribunal. It may be appropriate to request for an internal review where your case will be looked at by another HMRC officer who may come to a different conclusion.