Tax Compliance Checks

What triggers a compliance check?
How are checks undertaken?
After the check
Appeal a Decision

Overview

HM Revenue and Customs (HMRC) tax compliance checks are a means for the UK tax authority to verify that individuals and businesses are correctly reporting their income and paying the correct amount of tax. The purpose of these checks is to ensure that everyone pays their fair share of tax and to prevent tax avoidance and evasion.

If HMRC suspects that an individual or business is not compliant with tax laws, they may carry out a tax investigation. During a tax investigation, HMRC may request information and records, and may make a formal demand for payment if they find any underpaid tax.

Something may trigger a check. However, HMRC has the right to check whether any tax return is accurate and complete.

What triggers a compliance check?

HMRC carries out tax compliance checks in a variety of ways, including:

Random Checks: HMRC may randomly select individuals or businesses for a tax compliance check, either by computer or manually.

Risk Assessments: HMRC may use data analytics to identify individuals or businesses that may be at higher risk of not complying with tax laws.

Compliance Campaigns: HMRC may launch targeted campaigns on specific industries or types of taxpayers, such as the self-employed, landlords, or small businesses.

Information Sharing: HMRC may receive information from other sources, such as banks, building societies, and other government departments, and use this information to carry out tax compliance checks.

How are checks undertaken?

HMRC may ask to visit your home, business or an adviser’s office, or ask you to visit them. You can have an accountant or legal adviser with you during a visit.

You may have to pay a penalty if HMRC sends you an inspection or information notice and you do not send information or refuse a visit. You will not have to pay a penalty if you have a ‘reasonable excuse’, for example:

you’re seriously ill
someone close to you has died

If you think HMRC should stop the check, write to the office that sent you the letter, giving your reasons why.

You can apply for alternative dispute resolution (ADR) at any time if you do not agree with HMRC’s decision or what they’re checking.

After the check

HMRC will write to tell you the results of the check. You’ll be:

repaid if you’ve paid too much tax - you may also get interest on the amount you’re owed
asked to pay additional tax within 30 days if you owe more - you’ll normally have to pay interest from the date the tax was due

You may also have to pay a penalty. HMRC will look at:

the reasons why you underpaid or overclaimed the tax
whether you told HMRC as soon as you could
how helpful you’ve been during the check

If you have problems paying, you can tell the officer dealing with the check.

Appeal a decision

If you are not happy with the outcome of a compliance check, you can appeal. Your decision letter will tell you how to make an appeal and when you must appeal by.