HMRC Compliance Checks
A guide to understanding tax enquiries and investigations in the UK.
What is a Compliance Check?
A compliance check is how HMRC makes sure you’re paying the right amount of tax. It's not an accusation of wrongdoing.
Receiving a letter from HMRC about a 'compliance check' can be worrying, but it's a routine part of the UK tax system. It simply means HMRC is looking at your tax affairs to ensure everything is correct. This can cover Income Tax (via Self Assessment), Corporation Tax, VAT, or PAYE.
Why Was I Chosen?
HMRC can select anyone. Your selection could be random, or based on specific risk factors.
Random Checks
Some checks are completely random to ensure the overall system is working correctly.
Risk-Based
HMRC's 'Connect' system analyses data from various sources. Discrepancies may trigger a check.
Third-Party Info
Information from another source (like a bank or customer) might not match your tax return.
The Process: What to Expect
Understanding the steps can help demystify the process.
Getting Representation
It's highly recommended to authorise a tax agent or accountant to deal with HMRC on your behalf. They understand the process and can ensure your rights are protected.
Needing Help
If you have health or personal circumstances that make dealing with the check difficult, let HMRC know. They can provide additional support. Independent organisations like Citizens Advice or TaxAid can also offer free help.
HMRC: What to expect from a compliance check
HMRC: How checks work
Outcomes & Penalties
The outcome of a check can range from no change to penalties for inaccuracies.
HMRC: What happens if you get a penalty
HMRC: Help if you can't pay your tax bill
Penalties
If an error is found, a penalty may be charged. The amount depends on why the error occurred (e.g., genuine mistake vs. deliberate concealment) and can range from 0% to 100% of the tax owed.
Criminal Investigation
In the most serious cases, where HMRC suspects deliberate tax fraud, they may start a criminal investigation with a view to prosecution.
Disagreeing with a Decision
If you don't agree with the outcome, you have the right to appeal.
You can ask for an internal review by an impartial HMRC officer or appeal to the First-tier (Tax) Tribunal, which is an independent body. It's crucial to follow the correct procedures and deadlines.