Can HMRC enquire into an MTD quarterly update

Q: How does this look in practice?

Illustration only. A sole trader using standard periods includes £1,500 of private car costs in her second update for 2026 to 2027. Her accountant spots it in December and removes the records, so the third update, due 7 February 2027, shows corrected totals for the year to date. Nothing else is needed and no penalty arises from the second update. Suppose instead the error is not caught and flows into the return she submits on 20 June 2027. HMRC can open an enquiry until 20 June 2028. If it does, it can ask for the digital records behind each category total. The private costs are an inaccuracy in the return, and whether a penalty is due depends on whether she took reasonable care; see penalties for tax return errors.

No. A Making Tax Digital quarterly update is not a tax return, and HMRC’s power to open an enquiry under section 9A of the Taxes Management Act 1970 applies to the return, not to updates. HMRC checks the year through the tax return you submit through MTD software at the end (often called the final declaration), within the normal enquiry window. Errors in updates must be corrected, but penalties for inaccuracy are normally charged by reference to the return, while late updates attract penalty points from 2027 to 2028.

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What legally is a quarterly update?

Quarterly updates come from paragraph 7 of Schedule A1 to the Taxes Management Act 1970, which lets HMRC require “specified information” about a business at intervals of no less than three months. The Income Tax (Digital Obligations) Regulations 2026 (SI 2026/336) use that power. Regulation 9 calls an update “a submission of information” for each quarterly update period, and regulation 10 says its content is whatever HMRC specifies by direction.

HMRC’s own guidance is direct: quarterly updates “are summaries, not tax returns”. They contain category totals, not individual invoices or receipts, and you do not need to make accounting or tax adjustments before sending them. Each update is cumulative from the start of the tax year, so figures can be corrected in the next one. For what goes into them, see what goes in an MTD quarterly update.

Why can HMRC not open an enquiry into an update?

Section 9A(1) allows an officer to enquire into “a return under section 8 or 8A”. The 2026 regulations define “return” as the personal return required by a notice under section 8(1)(a), and regulation 8 requires that return to be delivered using compatible software. Quarterly updates are a separate obligation under regulation 9. Neither Schedule A1 nor the 2026 regulations contains a power to open an enquiry into an update.

So the formal check of a year under MTD happens in the same place as before: the self assessment tax return. What changes is the route to it. Under MTD you finish the year by adding other income, making year end adjustments and declaring the return correct and complete in your software; see the MTD final declaration.

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When can HMRC open an enquiry into the return?

The usual rules in section 9A(2) apply:

if the return is delivered on or before the filing date, HMRC has until 12 months after the day it was delivered;
if it is delivered late, HMRC has until the quarter day following the first anniversary of delivery;
if you amend it, HMRC can enquire until the quarter day following the first anniversary of the amendment.

The quarter days are 31 January, 30 April, 31 July and 31 October. Because the window runs from delivery, filing early shortens it. HMRC’s guidance confirms a return can be submitted any time after the tax year ends, so a 2026 to 2027 return filed in June 2027 is normally safe from a new enquiry after June 2028. See the enquiry window for tax returns.

Under section 9A(4) the enquiry extends to anything contained in the return, or required to be contained in it. In an MTD year the business figures in the return are built from the digital records and the fourth update, so an enquiry will naturally look back at those records and how the quarterly totals were produced. Only one enquiry can be opened into a return, unless it is later amended (section 9A(3)). After the window closes, HMRC needs the discovery assessment rules to collect more tax.

Can HMRC ask questions during the year?

Yes, but through information powers, not an enquiry. Paragraph 1 of Schedule 36 to the Finance Act 2008 allows an officer to require information or documents reasonably required to check a taxpayer’s tax position, and paragraph 64 defines tax position to include past, present and future liability. The main restriction, in paragraph 21, bites only once a return under section 8 has been made for the period: after that, a taxpayer notice for that period needs an open enquiry or one of the other conditions, such as a suspicion of underassessment. Before the return is filed, that restriction does not apply. The digital records you must keep under regulation 15 are records like any other, so they can be requested. See Schedule 36 information notices.

Are there penalties for errors in quarterly updates?

The law imposes a duty to correct. Regulation 17 requires you to correct errors in digital records as soon as possible using software, and to give HMRC the correct information for a wrong update. For the fourth update, or the update for the period in which a business ceases, the deadline is the return filing date; for any other update it is the next update deadline. See correcting errors in MTD quarterly updates.

The inaccuracy penalty in Schedule 24 to the Finance Act 2007 applies to documents listed in its table. The list names a return under section 8 but does not name quarterly updates. It also covers any document HMRC is likely to rely on, without further inquiry, to determine a liability. Because an update is followed by a return that fixes the liability, the realistic penalty exposure for a careless or deliberate error is the return. If an error in an update is carried into the return, that is where it will be judged.

Other sanctions are aimed at the process, not the figures:

Late updates. HMRC will not apply penalty points for late quarterly updates in 2026 to 2027. For later years, each missed deadline earns a point and a £200 penalty applies at 4 points.
Digital records. Paragraph 12 of Schedule A1 allows a penalty of up to £3,000 for failing to keep records required under the digital record keeping rules, unless a penalty under the general record keeping rule in section 12B(5) already applies for the period.

How does this look in practice?

Illustration only. A sole trader using standard periods includes £1,500 of private car costs in her second update for 2026 to 2027. Her accountant spots it in December and removes the records, so the third update, due 7 February 2027, shows corrected totals for the year to date. Nothing else is needed and no penalty arises from the second update.

Suppose instead the error is not caught and flows into the return she submits on 20 June 2027. HMRC can open an enquiry until 20 June 2028. If it does, it can ask for the digital records behind each category total. The private costs are an inaccuracy in the return, and whether a penalty is due depends on whether she took reasonable care; see penalties for tax return errors.

What do people get wrong?

Treating the in year tax estimate as an agreed figure. It is an estimate; the liability is fixed by the self assessment in the return.
Assuming HMRC has accepted the figures because four updates went in without comment. HMRC’s chance to challenge the year only starts when the return is filed.
Delaying an update to make it perfect. Late updates earn points from 2027 to 2028, while errors can be corrected in the next update.
Correcting the update total without correcting the digital record behind it, which regulation 17 also requires.
Forgetting that a later amendment to the return reopens the enquiry window for a further period.

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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.