F1: Investigations (general)
Three circumstances in which self-assessment is not final
“There are only three circumstances in which the self-assessment does not constitute the final determination of liability: firstly, when a taxpayer amends his return within twelve months of the filing date (ss 9Z(a), 9Z(b) and 12A(b)(a) TMA 1970); and secondly, when the Revenue gives Notice of Enquiry into the return and either the taxpayer amends his return during the enquiry pursuant to s 9B or s 12A(d) or the Revenue amends the return in accordance with a Closure Notice under s 28A or s 28B, or amends the self-assessment during the enquiry to prevent loss of tax pursuant to s 9C. The third exception occurs when the Revenue makes an assessment in accordance with powers conferred under a new s 29 substituted by FA 1994 with effect from the year 1996-1997.” (HMRC v. Tower MCashback LLP 1  EWCA Civ 32, §18).
No requirement for HMRC to have reason to suspect an underpayment, but must be for proper purpose
"...the distinction which the appellants seek to draw between “as of right” checks in section 9A enquiries and “reason to suspect underpayment” enquiries outside the section 9A window is incoherent and unprincipled. The principled position is that all investigations are subject to the public law restriction that powers must only be exercised for a proper purpose. In the same way as a section 9A enquiry could not be launched purely out of malice or on a capricious basis, there is no reason for importing a test from paragraph 21 of schedule 36, which is concerned with powers of compulsion to provide information, to all other aspects of the exercise of functions by HMRC save (on the appellants’ case) section 9A enquiries.
...it is in my judgment beyond doubt that HMRC’s functions include checking tax returns without opening a section 9A enquiry, including after the enquiry window has closed, with a view to determining if there are grounds for making a discovery assessment, and that such checking can include not just carrying out internal investigations by rereading the file and any documents contained on it, but conducting external enquiries, including contacting the taxpayer, to obtain information and documents on a voluntary basis." (JJ Management Consulting LLP v. HMRC  EWCA Civ 784, Simler LJ)
In the absence of reason to suspect, co-operation is voluntary but incentivised
"...The detailed statutory provisions (contained in schedule 24 of Finance Act 2007) provide for a discount to be applied to the penalty assessed to reflect a taxpayer’s cooperation (see paragraph 10 of schedule 24). Likewise, there are statutory provisions (section 94 Finance Act 2009) dealing with publication of a taxpayer’s details following a deliberate under-declaration of tax. In these ways, cooperation and compliance are incentivised, but that does not convert an otherwise voluntary investigation into a compulsory one. The voluntary nature of the exercise means that the taxpayer can (at any time) simply refuse to cooperate or to continue cooperating and can thereby force HMRC to open a section 9A enquiry if the window remains open, or issue a formal information notice pursuant to schedule 36, with the attendant safeguards." (JJ Management Consulting LLP v. HMRC  EWCA Civ 784, Simler LJ)
Court will only intervene with decision to commence informal investigation in exceptional circumstances
...the authorities show that there are a number of reasons for this reluctance by the courts to interfere with such decisions [to investigate or prosecute criminal or disciplinary proceedings]: first, the powers in question are entrusted to the relevant authority and to no one else; second, such decisions are typically “polycentric” in nature, involving a balance of policy and public interest considerations which are inter-connected; third, the powers are conferred in very broad and non-prescriptive terms; fourth, it is desirable for all challenges to take place in the substantive proceedings, with their procedural safeguards, to which the
investigation may lead, and avoid satellite litigation; and fifthly it is desirable to avoid the blurring of roles as between the investigator and the courts. In my judgment, this logic applies with even more force to a decision to investigate, which is even more open-ended in nature.
 That does not mean that the court has no jurisdiction on judicial review. To the contrary, HMRC, like all public authorities must exercise their powers so as to promote the statutory purpose for which they are given; and must act lawfully, exercising their powers in good faith and on a rational basis. However, in light of the features to which I have referred, in practice it will take a wholly exceptional case on its legal merits to justify judicial review of a discretionary decision by HMRC to conduct an informal investigation of the kind conducted here." (JJ Management Consulting LLP v. HMRC  EWCA Civ 784, Simler LJ)
Indication to the court of HMRC's rational concerns about taxpayer's tax position may be required
" ...the judge recorded the following "Ms Nathan did not suggest that HMRC could or did open informal investigations without any basis for them at all (unlike the case of a s.9A enquiry where I have accepted that HMRC do not need to have any suspicions before opening an enquiry). She took specific instructions on the basis of which she told me that HMRC investigate where they have a concern; that may be as a result of information received; or it may arise in some other way...."
...I agree with the judge that in the absence of any basis for concluding the investigation was being conducted JJ Management unlawfully, it is not for the court to dictate the way in which the investigation should proceed or to limit its scope. The judge found that Mr Brown’s witness statement indicates what his remaining concerns are and why; and that they are not on the face of it irrational or misconceived. In those circumstances and on the premise that the continuing investigation is lawful, I can see no legitimate basis for the court to step in and micromanage HMRC’s conduct of it." (JJ Management Consulting LLP v. HMRC  EWCA Civ 784, Simler LJ)
No rule that an unlawfully started investigation cannot be continued lawfully
" Thirdly, I do not accept that even if unlawfully started the investigation cannot lawfully be continued. There is no general principle based on “fruits of the poisoned tree” and Mr Moser identified none; instead the general principle is that illegally obtained material remains admissible subject to some particular statutory exceptions. If the investigation can lawfully be continued, HMRC could simply start a new investigation at this point and it is difficult to see what purpose there could be in declaring the investigation to have been unlawfully commenced in these circumstances." (JJ Management Consulting LLP v. HMRC  EWCA Civ 784, Simler LJ)
Code of practice 8 (COP8)
Tribunal has no jurisdiction to order discontinuance
“HMRC’s enquiry under COP 8 was not expressed in their letter dated 8 March 2010 to be limited to any specific period. There is no general power given to the Tribunal to make any form of direction in relation to such an enquiry.” (Alkadhi v. HMRC  UKFTT 741 (TC), §46).