Can HMRC hold a repayment during an enquiry

Yes. Under section 59B(4A) of the Taxes Management Act 1970, if HMRC opens an enquiry into a Self Assessment return that shows a repayment, it does not have to pay that repayment until the enquiry is completed by a final closure notice, although the officer may make a provisional repayment of whatever amount they think fit. HMRC’s own guidance says officers should not hold back more than the tax genuinely at risk and should release further amounts as issues are resolved, and repayment interest keeps running while the money is held.

What does the law actually allow HMRC to do?

Section 59B sets the normal rule that the difference between the tax in a self assessment and the payments on account and tax deducted at source is payable or repayable by 31 January after the tax year. Subsection (4A) changes that for returns under enquiry. Where the return on which the self assessment is based is enquired into, nothing in the normal rule requires the repayment to be made before the day the enquiry is completed under section 28A(1B), which is the day HMRC issues a final closure notice. But the officer may at any time before that day make the repayment “on a provisional basis, to such extent as he thinks fit”.

A parallel rule covers claims made outside a return. Under paragraph 4 of Schedule 1A to the 1970 Act, HMRC must give effect to such a claim by discharge or repayment as soon as practicable, but if the claim is enquired into that duty does not apply until the enquiry is completed, and again the officer may give provisional effect to the claim before then.

So the legislation gives HMRC a power to wait, not a duty to pay part. The obligation to consider part payment comes from HMRC’s published guidance.

Does HMRC have to open an enquiry to hold the money?

Yes. The Enquiry Manual at EM1609 says that if an officer intends to withhold all or part of a repayment, they must open an enquiry into the return. Before doing so they should carry out a full risk assessment of the whole return, the enquiry should cover all the risks identified, and there should be no undue delay between the risk assessment and the enquiry notice. The opening letter is expected to say, with wording the same as or similar to HMRC’s template, that under section 59B(4A) the officer does not intend to repay any of the amount, or intends to make a provisional repayment of a stated sum, until the enquiries are complete.

On HMRC’s systems, the Self Assessment Manual at SAM110125 explains that a “no repayment” signal is set automatically when a section 9A enquiry is registered. It is removed automatically when a settlement date is entered on the record, and a repayment can be issued before then by an officer overriding the warning. The usual time limits for opening an enquiry are covered in the enquiry window for tax returns.

When should HMRC still pay part of the repayment?

EM1609 contains two instructions that are worth quoting back to an officer. First, officers “should not withhold repayment of more tax than is appropriate in the light of the perceived tax at risk”. Second, if all or part of a repayment is withheld at the start, the officer “should make a (further) provisional repayment during the course of the enquiry if it becomes appropriate” as individual issues are resolved.

In practice that means an enquiry into one item, such as a single expense claim or a disputed relief, should not normally freeze a repayment that arises from something else entirely, such as tax deducted under PAYE that nobody is questioning. The same guidance also explains why HMRC sometimes holds the full amount: it gives examples such as doubt about whether the claimant could repay if the repayment later proved not to be due, and repayments generated by avoidance schemes, where paying out might suggest HMRC had accepted the scheme.

What happens to an amendment made while the enquiry is open?

If you amend a return that is already under enquiry, section 9B says the amendment does not restrict the enquiry and, so far as it changes the tax payable, it does not take effect while the enquiry into the points it relates to is in progress. It takes effect when a closure notice covering those points is issued, unless the officer states that it has been taken into account or is incorrect.

Schedule 3ZA then fixes the payment date. Where an amendment of this kind produces a repayment, it is repayable 30 days after the relevant day, and for a repayment the relevant day is the date of the final closure notice even where an earlier partial closure notice dealt with the matter. A partial closure notice therefore does not, on its own, trigger the repayment, although the officer can still make a provisional one.

How does interest work on a delayed repayment?

Holding a repayment during an enquiry does not stop interest. The Self Assessment Legal Framework at SALF306 explains that repayment interest runs from the repayment interest start date until the date the repayment is made. The start date is generally the later of the date the tax was paid and the date it was due. For tax deducted at source, such as PAYE, it is 31 January after the end of the tax year, and for a repayment arising from a claim to carry back losses it is 31 January after the later tax year involved.

HMRC sets repayment interest at the Bank of England base rate minus 1%, with a floor of 0.5%, and section 749 of the Income Tax (Trading and Other Income) Act 2005 makes it exempt from income tax. Because the rate is well below the late payment rate, interest compensates for the delay but rarely makes waiting worthwhile. The rates and mechanics are covered in HMRC repayments and repayment interest.

When the enquiry ends, Schedule 3ZA paragraph 5 says an amount repayable as a result of a closure notice amendment is due 30 days after the closure notice is given.

How can you get a withheld repayment released sooner?

• Separate the undisputed amount. Write to the officer identifying which part of the repayment is not affected by the enquiry and ask for a provisional repayment of it, referring to EM1609.
• Answer information requests promptly and completely. Each issue that is settled is a reason to release more.
• Ask for a partial closure notice on settled issues. It will not force the repayment by itself, but it formally closes the matter and supports a request for a provisional repayment.
• Apply to the tribunal for a closure notice. Section 28A(4) lets you ask the tribunal to direct HMRC to issue a closure notice within a specified period, and the tribunal must do so unless HMRC shows reasonable grounds for not closing. Paragraph 7(5) of Schedule 1A gives the same right for a claim outside a return. See HMRC closure notices.
• Complain about service delay. If HMRC is simply not progressing the case, a complaint is separate from the technical dispute. See HMRC complaints and the Adjudicator.

What does this look like in practice?

Illustration only. Daniel’s return shows a repayment of £6,000. Of that, £1,000 comes from tax deducted under PAYE that was not reflected in his tax code, and £5,000 comes from a large claim for business expenses. HMRC opens an enquiry into the expenses claim and its letter says it will hold the whole £6,000 under section 59B(4A).

Daniel’s adviser replies, supplies the expense records and points out that the PAYE element is not affected by the enquiry. Following EM1609, the officer makes a provisional repayment of £1,000. Three months later the officer accepts £3,000 of the expenses and the final closure notice amends the return. Once the final closure notice is issued, section 59B(4A) no longer lets HMRC hold the further £3,000, which is repaid with repayment interest from the relevant start date, and the remaining £2,000 is never paid. If Daniel disagrees with the conclusion he can appeal; the options are set out in statutory review and the tax tribunal.

What mistakes do taxpayers make?

• Assuming HMRC must pay the undisputed part. The law only gives the officer a discretion; the argument for part payment rests on HMRC’s guidance, so it has to be asked for.
• Amending the return during the enquiry and expecting an immediate refund. Section 9B defers the effect of the amendment.
• Treating a partial closure notice as releasing the money. For a repayment the timetable runs from the final closure notice.
• Waiting indefinitely. A closure application to the tribunal is often the quickest way to make HMRC set out its position.
• Confusing a pre issue security check with an enquiry. The difference is explained in why HMRC holds a Self Assessment repayment for checks.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• Making a payment to HMRC during an enquiry
• Can you change accountant during an HMRC enquiry
• HMRC jeopardy amendments during an enquiry
• Should you meet HMRC during an enquiry
• Can an accountant hold shares in a client company

Sources

• legislation.gov.uk: Act 1970 c. 9, section 59B
• legislation.gov.uk: Act 1970 c. 9, section 28A
• legislation.gov.uk: Act 1970 c. 9, schedule 1A
• GOV.UK: Manual page EM1609
• GOV.UK: Manual page SAM110125
• legislation.gov.uk: Act 1970 c. 9, section 9B
• legislation.gov.uk: Act 1970 c. 9, schedule 3ZA
• GOV.UK: Manual page SALF306
• GOV.UK: Rates and allowances hmrc interest rates
• legislation.gov.uk: Act 2005 c. 5, section 749

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.