Once any underpayment of tax has been determined, HMRC will consider why the mistake or omission arose and whether this may have similarly affected the tax position for earlier ‘closed’ tax years.
If HMRC has reasonable grounds to suspect there has been an underpayment of tax in earlier years, they have wide-ranging powers that enable them to look into these earlier years, ask for further information and potentially take formal action to collect the additional tax. HMRC can apply penalties of varying percentages in addition to the tax and late payment interest due, which will depend on the behaviour that has led to the underpayment of tax and the level of cooperation with HMRC during their enquiries.