Alongside a new obligation to correct errors, proposed changes to HMRC’s information-gathering powers are raising concerns about how far the tax authority could go when investigating taxpayers’ affairs.
New regime could bring historic tax mistakes back into focus
From April 2028, HMRC plans to introduce a new ‘Duty to Correct’ regime, requiring taxpayers to take reasonable steps to correct inaccuracies in tax returns and other documents once they become aware of them.
Under the proposed rules, taxpayers who discover an error but fail to take reasonable steps to correct it could face significantly harsher consequences. Even where the original mistake was entirely innocent, failing to put it right could mean the inaccuracy is treated as deliberate for tax penalty and assessment purposes.
This could have serious implications for how far back HMRC can investigate. Where an error is treated as deliberate, the existing 20-year assessment time limit could apply, potentially allowing HMRC to pursue historic tax liabilities that would otherwise have fallen outside the normal four or six-year assessment windows.
The proposals have also raised concerns about the practical challenges for taxpayers, particularly the self-employed. While businesses and individuals are generally required to retain tax records for five to six years, they could face questions about historic returns long after the supporting documentation has been discarded.
There are also questions around proportionality, particularly where relatively small errors could trigger formal correction notices and potentially significant penalties.
HMRC criticised over plans to access AI chat histories
In a separate development, HMRC is facing criticism over proposed changes to its powers to request digital information from taxpayers and third parties.
The draft legislation, included in the upcoming Finance Bill, would broaden HMRC’s ability to request information by expanding the definition of digital records and introducing the concept of a ‘relevant thing’.
The changes reflect the growing use of digital tools and automated systems in managing financial information. HMRC says the intention is to modernise its existing information-gathering powers, rather than give it unrestricted access to people’s private AI conversations.
However, the proposals have prompted concerns around privacy, proportionality and the extent to which digital conversations could become part of a tax investigation. Taxpayers who fail to comply with formal information notices could also face financial penalties.
Peace of mind starts with the right tax advice
These developments highlight the importance of having experienced tax advisers who understand your affairs and can help you meet your obligations.
Tax rules are becoming increasingly complex, and the responsibility for ensuring that tax returns are accurate ultimately rests with the taxpayer.
Our experienced tax team provides advice and support across a wide range of personal and business tax matters. We can help you identify and address potential issues, make appropriate disclosures to HMRC and navigate the complexities of tax compliance.
We also offer a Tax Investigation Service, which, for an annual premium, provides our professional representation and support in the event of an HMRC enquiry or investigation, helping protect you against the professional fees associated with defending your tax position.
Contact our experienced tax team
If you have concerns about your tax affairs or would like to find out more about our tax services, please contact our tax team.
Leo advises on personal tax compliance and planning, with expertise in tax residency, cross-border issues, capital gains tax and director responsibilities.
